What problems might have contributed to the firm’s poor performance?

After reading the required material in the book, it stated that Rose and Martin had spent 18 months on their business plan but it left a lot of details that would be good to know.  My first thoughts were how long did they know each other before starting the business?  How much extra money did they have for gaps in initial estimates?  Did they advertise at all, or did they rely on word of mouth?  Was there any problems in the initially startup such as faulty equipment, or issues with employees such as factoring in taxes on their pay checks or provide medical or benefits?  I mean, if you think about it a lot of things could of went wrong which is why small businesses struggle when starting up. 

A lot of people that I know who have tried to establish themselves have told me that they didn’t start making actual profits until 3-5 years.  With that being said, John and John may have not continually updated their business plan and goals in order to meet the minimum expectations.


Question 2: Although several problems were encountered in implementing the business plan, the primary reason for the low profits turned out to be embezzlement. Martin was diverting company resources for personal use, even using some of the construction materials purchased by the company to build his own house. What could Rose have done to avoid this situation? What are his options after the fact?

When it comes to having a solid answer for this question, it is slightly difficult to have an exact response.  The human factor is always difficult to judge in someone when you have a business with them.  The ups and downs of a company sometimes make people do crazy things.  Obviously what Martin did was wrong, but Rose could have tried to cover his bases in the beginning to have some form of documentation with a misconduct policy within it. I.E.  If you do something or get caught in the act of violating some form of guideline, then you pay the price.  If this were to happen in the beginning, Rose would have all the ammunition he needed in order to press charges against Martin for misuse of business funds/equipment. 

In the small business I have worked with for a few years, we have a middle man who controls the money.  He cannot spend any, but anyone that uses business funds for whatever reason has to have at least two other people’s sign off in order to get permission.  By doing it this way, everyone knows where all the money is going to.  In all the time we have had together.  We haven’t experienced a single issue and developed stronger trust and faith in one another.  Long story short, Rose needs to implement his own form or set of rules and guidelines and get some legal action started immediately if he wants to see any of the money back.