PPREPARING A BUSINESS PLAN

CHAPTER $5$CASE $5$A

Note: The suggested marking scheme for case studies will be that for each case, you start out with

full marks and points are deducted in three categories:

$1.$Thoroughness $$ one point is deducted for each missing item.

$2.$ Feasibility $$ one point is deducted for any item that is incorrect or illogical.

$3.$Writing $$ one point is deducted for each grammar, spelling, or style error to a maximum of one

third of the total.

DOUGLAS

Douglas Mills has started a business that provides convalescent homes, chronic care facilities

and hospitals with temporary help in the form of qualified registered nurses. Mills$$ customerREPARING A BUSINESS PLAN

CHAPTER $5$CASE $5$A

Note: The suggested marking scheme for case studies will be that for each case, you start out with

full marks and points are deducted in three categories:

$1.$Thoroughness $$ one point is deducted for each missing item.

$2.$ Feasibility $$ one point is deducted for any item that is incorrect or illogical.

$3.$Writing $$ one point is deducted for each grammar, spelling, or style error to a maximum of one

third of the total.

DOUGLAS

Douglas Mills has started a business that provides convalescent homes, chronic care facilities

and hospitals with temporary help in the form of qualified registered nurses. Mills$$ customers all

have their own nursing staff, but need extra help when they have unusually large patient loads

or particular problem or terminal patients.

The past three months has been unusually busy for Mills, with all of his nurses placed

almost every single day. This is great for the profitability of his business but surprisingly,

has caused some serious financial problems.

Many of Mills$$ nurses do not want full$-$time work. Some are raising families or living in semi$-$

retirement but they enjoy the extra cash and the variety of occasional work. Mills pays his

employees immediately, at the end of each work week. However, he bills his clients at the end

of each month, and then gives them an additional thirty days to pay their invoices. $($Some take

considerably longer$).$

Those customers that are chronically late in paying almost always come through after his

second or third reminder call. However, Mills has been scrambling around so much, to find and

place nurses, that he hasn$$t had time for following up on overdue accounts. And many of them

are way overdue.

The large payroll over the past while has totally depleted all of the cash that Mills had on hand.

It has also used up all of the $$50000$ line of credit that he has with a local bank. To make

matters worse, Mills has avoided paying his own bills, for the last three months so that he

could give priority to paying his employees.

He is now being harassed and even threatened with re$-$possession by the companies that he

leases his computers and automobile from. Furthermore, the landlord says that the lease for his

office is in default for non$-$payment. She has notified Mills that she can now evict him and find a

tenant that will pay a higher rent. $($Mills hopes that this is just a ploy to raise the rent$).$

The phone company is warning of service termination and Mills has to come up with almost $$16$

$000$ to meet his payroll on Friday. The insurance company that handles the liability coverage for

the nurses $($without the insurance, Mills$$ clients will not use him$)$ has sent a registered letter

reminding that the coverage lapses in $30$ days. On top of all that, one of Mills$$ largest clients, a

nursing home chain has not paid the last $6$ months of invoices and looks like it may be headed

for bankruptcy.

It is Tuesday, the day after Mills went to his banker to ask for an additional $$30000\mathrm{.}00$ on his line of

credit. He brought along his accounts receivable, to demonstrate that his customers owed

Preparing a Business Plan

Case $5$A Handout

Page $1$

him over $$140000,$ and this did not include the outstanding balance from the failing nursing

home $($which he expects to write off$).$

The interview did not go as Mills had expected. The banker seemed overly concerned about the

credit extended to the failing nursing home company and was not impressed by the huge

growth in Mills$$ business. She kept repeating that Mills should have come to her much, much

sooner and ultimately she refused to extend the line of credit. She also reminded him that the

bank was within its rights to demand immediate repayment of the current line$-$of$-$credit balance

at any time. $($The banker did not go so far as to actually $$call$$ the loan$).$

Mills is feeling extremely frustrated. He is making more profit than ever but his businesses is

about to go bankrupt because he can$$t pay his bills. He is particularly worried about paying the

temps and has only three days to come up with the money.

$1.$ What should Mills do now? List several steps he should take and explain why.

$2.$ If Mills survives this crisis, what procedures can he put in place to avoid future

cash shortages?

$3.$ Speculate on why the banker was not more supportive of Mills