Discussion on Entrepreneurship and Small Business

case study
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College of Administrative and Financial Sciences



Assignment 3

Deadline: 28/11/2020 @ 23:59



Course Name: Entrepreneurship and Small Business Student’s Name:
Course Code: – MGT 402 Student’s ID Number:
Semester: I CRN:
Academic Year: 1440/1441 H


For Instructor’s Use only

Instructor’s Name: Dr. Vinay Nagu
Students’ Grade:  Marks Obtained/Out of Level of Marks: High/Middle/Low


  • The Assignment must be submitted on Blackboard (WORD format only) via allocated folder.
  • Assignments submitted through email will not be accepted.
  • Students are advised to make their work clear and well presented, marks may be reduced for poor presentation. This includes filling your information on the cover page.
  • Students must mention question number clearly in their answer.
  • Late submission will NOT be accepted.
  • Avoid plagiarism, the work should be in your own words, copying from students or other resources without proper referencing will result in ZERO marks. No exceptions.
  • All answered must be typed using Times New Roman (size 12, double-spaced) No pictures containing text will be accepted and will be considered plagiarism).
  • Submissions without this cover page will NOT be accepted.




Department of Business Administration

Entrepreneurship and Small Business – MGT 402

Marks: 5

Course Learning Outcomes:

  1. Demonstrate a solid understanding of the potential of entrepreneur in today’s competitive business world. (Lo 1.2).
  2. Design a solid projected financial Plan and conduct a breakeven analysis for a small company. (Lo 2.5).
  3. Demonstrate a thorough understanding regarding the importance of cash management for the success of a small business. (Lo 2.8).

Assignment – 3

Students are supposed to read the Case 2- Able Planet from the textbook, page number:812


“How can a small company find capital to finance an innovative new product?”

Textbook: (Scarborough, N.M. & Cornwall, J. (2012). Effective small business management: An Entrepreneurial approach (10th ed.). Upper Saddle River, NJ: Prentice Hall.

Based on your understanding of the case and concepts, answer the following question in 200-350 words each.


Assignment Questions:

  1. Experts say that entrepreneurs who need between $100,000 and $3 million often face the greatest obstacles when raising capital for their businesses. Why? (1.5 marks)
  2. How should Kevin Semcken raise the $1.5 million in capital that Able Planet needs? Be sure to consider sources of both debt and equity financing. (1.5 marks)
  3. Write a short memo to Kevin Semcken explaining what he should do before he approaches potential lenders and investors to maximize his chances of getting the capital that Able Planet needs. (2 marks)






Case 2
Able Planet
How can a small company find capital to finance an innovative new product?
Venture capitalist Kevin Semcken discovered Able Planet,
a small startup in Wheat Ridge, Colorado, that produces headphones with an imbedded magnetic coil to enhance sound quality,
at a technology conference in Denver, Colorado. Semcken, who
suffers from a hearing loss in one ear, was intrigued and tested
the small company’s product by listening to Dean Martin’s “You’re
Nobody ’Til Somebody Loves You.” “I was instantly a fan,” he
says. Semcken invested in Able Planet and soon became the company’s CEO and chairman. Two years later, the company’s unique
noise-cancelling Linx headphones won an award for innovation at
the Consumer Electronics Show, and orders began pouring in. In no
time, the company’s annual revenue reached $2 million.
Semcken was pleased with Able Planet’s progress, but he
had a bigger vision for the company. Inspired by stents, balloonlike devices used in medical procedures to clear blocked arteries,
Semcken came up with the idea of earphones that incorporated an
inflatable disk that could conform perfectly to the size and shape
of a person’s ear canal. The result would be a set of earphones that
fit snugly into the ear canal, stay in place even during strenuous
activity, and block out ambient noise. He even had a great name
for the product: Sound Fit. Semcken saw the potential for Sound
Fit not only to improve substantially the performance of earphones, but also to revolutionize the design of other products,
such as Bluetooth headsets and hearing aids. He had lined up
30 potential customers who were interested in learning more about
the innovative earphones and had convinced them to sign nondisclosure agreements. What Semcken needed now was financing
so that Able Planet could manufacture production-quality prototypes of the Sound Fit earphones and generate orders.
Then Able Planet’s banker called with bad news. The bank
was changing the terms of Able Planet’s $2.5 million line of
credit. Under the new terms, the bank would no longer finance
the upfront cost of raw materials and manufacturing. Semcken
was stunned because even though Able Planet was not yet cash
flow positive, the company had always made its payments to the
bank on time for the last 3 years. Without a flexible line of
credit, Able Planet would not be able to purchase the materials
and manufacture the headphones that its retail customers,
including Costco and Walmart, demanded. The credit line
restriction came at the worst possible time. Able Planet was
gearing up for the late-spring graduation season, its second
biggest sales period of the year after Christmas. The company
normally cranked up production for the crucial back-to-school
and Christmas seasons (which account for 60 percent of its
sales) during the summer, but the bank’s new restrictions on its
line of credit put its most lucrative sales seasons in jeopardy.
Semcken met with Able Planet’s two board members, Rob
Cascella and Steve Parker, both of whom are investors in the
company. They advised him to put the Sound Fit earphones on
hold for the time being and to focus on increasing sales of Linx
headphones. Without a way to finance production of the headphones, however, Semcken knew that opening new retail
accounts and increasing production would be impossible. He
needed $1.5 million to finance current operations for Linx,
build the Sound Fit prototypes, and market both products to
new and existing customers. Semcken traveled around the
country to call on 15 different banks, but none of them was
interested in making a loan. A crisis in the financial markets
had all but slammed shut the lending window at most commercial banks. Semcken pondered his options.
1. Experts say that entrepreneurs who need between
$100,000 and $3 million often face the greatest obstacles
when raising capital for their businesses. Why?
2. How should Kevin Semcken raise the $1.5 million in
capital that Able Planet needs? Be sure to consider
sources of both debt and equity financing.
3. Write a short memo to Kevin Semcken explaining what he
should do before he approaches potential lenders and
investors to maximize his chances of getting the capital
that Able Planet needs.
Sources: Based on Jamie Kripke, “Case Study: Able Planet,” Inc.,
July–August 2009, pp. 58–61; “About Us,” Able Planet, www.ableplanet.com/

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