TIRE VALET: A MOBILE TIRE COMPANY Any time of the day during the week you may see a white box truck in the high income neighborhoods of the Boston suburbs working on a residents automobile, SUV, or truck. The driver of the truck who is also an auto mechanic may be changing the tires on a vehicle or performing some mechanical service. Inside the truck you can find machinery to change, balance, and repair tires, or tools and parts to repair brakes, change oil, or perform other basic repair functions. After about an hour and a half, the owner of the vehicle may be seen paying the driver with a credit card or check the $600 plus it cost to replace four new tires on her or his SUV. This service was performed right in her or his driveway and saved her or him a few hours of time that it would have taken to drive to a tire service facility and then to wait to have the four new tires installed. The customer in this instance appreciates the fact that the cost of this service will be slightly higher than what a retailer would charge but is well worth it given the time saved and convenience of having this service performed right in her or his driveway, even during cold weather months. The company, Tire ValetA Tire Changing Service, is based in Waltham, Massachusetts (a Boston suburb), and is a recent startup launched last spring. The owner of this startup is Jack Welch and according to his research Tire Valet is the only company performing this service in the Boston area. He discovered that there were many mobile tire service companies in other states, particularly in warmer climates, but none based in the Northeast. Welchs inspiration for this startup occurred after two events: the first was having a damaged windshield replaced in his driveway in January and the second was when he had four new tires installed on his SUV for which he had to wait more than 2 hours. His frustration at having to wait so long for the tire installation perhaps inspired his realization that if windshields could be replaced any time of the year, the same could be said for changing tires at a customers home or where they worked. He also found that many small mobile tire companies in Florida and California were beginning to sell franchises of their operations. This indicated to him that these companies were experiencing enough growth to warrant the decision to franchise their operations. Welch decided to launch his version of a mobile tire company during the spring. He started with one truck that was purchased used from a large truck rental company. He also found machinery for changing, repairing, and balancing tires from a GMC dealership that was closing down. He was thus able to buy the truck and then outfit the truck with all the necessary equipment for less than $40,000. Convenience and time savings at a reasonable cost would be the central selling points for the Tire Valet. Welchs is a classic example of an entrepreneur having been successful as well as a failure in previous entrepreneurial endeavors. As a high school student, he had sold T-shirts and had his own landscaping company with two other friends. His landscaping business was very successful in his sophomore and junior years of high school but during his senior year his friends became more involved in other activities and lost interest in the business forcing him to end the endeavor. After graduating from college in 2000, he started collecting antiques while working for an industrial cleaning products company. He found that antiques were much more interesting than his job as a purchasing agent for this company so he decided in 2005 to leave his job and become an antiques dealer. At first, he bought space at antiques flea markets, also continuing to collect and buy wherever he found an opportunity. Estate sales, auctions, and flea markets were his best sources of finding quality antiques. His specialty was carpets and furniture, which took up too much space in his converted garage and basement, so he eventually opened his own retail store in an upscale Page 559Boston suburb. His success with the one shop eventually led him to open a second antiques store in another community. After 10 successful years of business and significant changes in his personal life with the birth of two children, Jack became tired of the constant traveling to auctions, sales, and shows and decided to sell his business. This was about the time that he realized that there might be an opportunity to start a mobile tire changing company. In January, Welch started testing the idea, driving around to office buildings, stopping by companies at random, and offering to do tire changes for the employees who worked there. Hed remove a customers wheels, throw them into his SUV, take them to a nearby service station to have the tires replaced, and bring them back. I tested the market demand that way for two months before I decided to buy the truck, he explains. It was at this time he noted that there were other companies like this in other parts of the country but none in the Northeast. He also wondered why none of the major national auto-service chains such as Goodyear, National Tire and Battery, and Sears had attempted to enter this market. He thought that perhaps the major resistance was because of the climate in the Northeast. Most of the existing firms providing this service were located in warmer climates such as Florida, Arizona, and California. As mentioned, he reflected that many of them were also beginning to sell franchises, which indicated to him that the opportunities were great. He felt that if the glass replacement companies could provide their services year round despite the cold climate, why not mobile tire changing? Welchs marketing pitch is simple and focuses on the fact that most people are busy and do not enjoy spending precious time at a tire store waiting around for the service to be performed. His initial marketing communications strategy was to print fliers that stressed the time saving and convenience of his service. He would come to your home or where you worked and would perform the service. The fliers were left in coffee shops and anywhere else that Welch could persuade to display his fliers. He recently developed a website with the assistance of one of his college classmates. In addition, he bought a yellow pages ad (1/8 of a page in size). He was willing to make cold calls and even visit local companies during his free time. At this time, he utilized no other marketing strategy but planned on budgeting more money for promotion in the future. Most customers arent particular about the brand of tires that he supplies; Welch buys tires for each job from a local distributor. Most people just want tires that are reliable but there are occasions where a customer specifies a brand of tire which Welch can satisfy by a special order from his distributor. The average invoice for service on passenger cars and SUVs for the tires and labor has been about $600 (this reflects an average service call, which may include 14 tires). He has been averaging about six service calls per week in the first two months of operation. However, he projects that he will average about 10 service calls per week in month three of operation. Eventually, Welch says, he may offer brake pad and rotor replacement, too, which would enable the company to charge another $400 or so. Welch claims that each job he does is profitable but that the bottom line could be improved significantly by offering the same customer more than just tire service. Welch estimates that he has spent about $10,000 on marketing to this point but he realizes that he needs to refine his marketing strategy as well as come up with other more effective strategies to grow the business. He has considered offering discounts or a one-time payment to customers who would provide him with referrals. However, he is not sure how this would be accepted. It is important to consider a more structured strategy at this point if he wants to grow his business. His goal is to add trucks and continue to expand his geographic coverage of his market. Right now he focuses on three communities (households and businesses): Waltham, Wellesley, and Framingham (see Exhibit 1 for demographics of these communities). His office right now is in his home but he sees the need to find office space by the beginning of the second quarter. Exhibit 2 presents the sales projections for year 1. Welch feels that in the first month he will average about one customer per day. The average invoice per customer has been about $600. In the second month and subsequent months, he has projected increases in the number of customers. In the eighth month, he expects to add a second truck with a similar cost of $40,000. In the first three months, Welch will perform the entire tire changing services himself but he is planning on hiring a driver/mechanic at the beginning of the fourth month at a salary of $20/hour. He also will hire a secretary at the same time so that he can focus more of his time on marketing and strategies for future growth. Welch also feels he could draw a salary beginning the fourth month given the revenue that he has been able to generate so far. Exhibit 3 illustrates the projected revenues and expenses for the operation over the next 12 months. Given his prediction of success in the next 12 months, Welch feels that he will need to seek investment monies to continue to grow the company. He will also need to prepare a more comprehensive business plan to submit to potential investors. Exhibit 4 presents some of the costs of tires as well as the labor rate that he will charge his customers with a minimum of one hour of labor for every job. In addition to needing assistance with the preparation of a business plan, Welch also needs to address some of the following issues: Answer the questions: Is there a growing need for this service? What conditions in the economy and market would support growth for this service? Who are his major competitors? What would be their major strengths and weaknesses? What changes in the environment could negatively affect any future opportunities for this venture? What should be the target market for this venture? Are there other specific markets besides people at work or at home that might need this service?

Review the following case and respond the the questions. The questions are identified at the end of the case.

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