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Springy Fields: An Entrepreneur’s Dilemma


Michael Breward, University of Winnipeg
Katherine Breward, University of Winnipeg
Matthias Tietz, IE Business School

I
t was the spring of 2010 and Tom Wilson sat on the couch in his living room
browsing the latest trip offerings on his favorite travel website. He was trying to
decide whether South America or Australia would be a better bet for his annual
two month winter holiday. He always tried to go somewhere warm in January and
February since that was when the snow was really flying in his hometown of Spring-
field, Ontario. Tomfelt a vague sense of guilt as he compared excursions to Ayers Rock
and Angel Falls. He knew he should really be putting more thought into the difficult
question of where to take Springy Fields, his entrepreneurial venture, but he pondered
why he could not shake his hesitation. He thought back to the conversation he’d had
recently with Janet Roe, a friend and business consultant whom Tom had used as an
informal advisor since he decided to make Springy Fields his full-time job:
fte company has been doing very well since the beginning, so I feel like I should be
coming up with an expansion strategy. But what should that strategy be? More impor-
tantly do I really want to expand at all? I know that the point of running a business is
supposed to be to grow it as large as possible and make as much money as possible but
I’m not convinced that’s right for me. I value my downtime and I’m not sure I’m up
for all the work that would come with expansion. But then I go back to feeling like I
SHOULD expand, after all, that’s what you do when you are successful. Isn’t it?

How It All BegAn: tHe lAuncH of SprIngy fIeldS


Tom had started Springy Fields eight years previously, in 2002, at age thirty-three.
He began the company partially for social reasons and partially to make a little extra
spending money. Tom was a structural engineer and worked on designing buildings to
withstand high winds. He was often obliged to work alone and found that he missed
the collegiality of his university days when he had frequently played sports such as soc-
cer and beach volleyball with buddies. ftose relationships had meant a lot to him. He

Copyright © 2015 by the Case Research Journal and by Michael Breward, Katherine Breward, and
Matthias Tietz. All rights reserved to the authors and NACRA. We wish to thank Dennis Bishop, Paul
Bryson, Bryden Boyechko, and Amninder Sidhu for making the Instructor’s Manual stronger by contrib-
uting their insights. fte authors would also like to thank John Waltman for his valuable editing services
and Rosalie Harms for verifying the financial calculations in the Instructor’s Manual. Finally, we would
like to thank the editor of the Case Research Journal and the anonymous reviewers for their time, effort,
and invaluable suggestions for improving the case. fte name of the organization as well as all the charac-
ters have been disguised. ftis case was written for class discussion rather than to illustrate the effective or
ineffective handling of a managerial situation

Springy Fields: An Entrepreneur’s Dilemma 1

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recalled a conversation he had when he ran into an old volleyball friend. “I really miss
the outlet of playing sports with my buddies—volleyball was always such a great stress
reliever. When you’re annoyed there’s nothing better than a good spike to release some
tension! Mostly I miss hanging out, talking, joking around.” “I know what you mean,”
his friend agreed, “there’s all these super-competitive leagues but I’m getting too old
for that crap. A lot of the guys on those teams are still out to prove something. I’m
not willing to get hurt; I just want to play, maybe meet some new people. How come
there’s no house league for grown-ups?”
Tom thought about it for a couple of weeks, then decided to fill the gap. He was
interested in a new sport he’d heard about called ultimate frisbee (see Exhibit 1).
He thought that with a bit of effort he could arrange to rent playing fields from the
city and he hoped there would be enough interest to make it worthwhile starting a
casual, recreational league. He lived in Springfield, a small Southern Ontario city with
a population of about 125,000, with many smaller rural communities surrounding the
city that could also draw players if people were willing to drive 20–30 minutes. fte
city’s population included a large number of transient students from a local mid-sized
university and a community college. ftose students would have access to on-campus
recreational sports, so Tom expected lower demand among young adults. However,
he thought his league would appeal to players from a broad range of ages and back-
grounds with twenty to thirty-year old, middle-class people as his most promising
market.
Tom put an ad in his local community activity guide, a semiannual document
mailed to every household in the municipality that outlined local sports and recreation
opportunities such as skating arena hours and pool schedules. He also put up a few
posters trying to recruit teams. Each team required 10–14 players, so Tom expected
only a few teams to register, mostly made up of personal friends and acquaintances. He
was pleasantly surprised when sixteen teams registered within three weeks. It was a little
more work than he anticipated keeping everyone updated with scores and schedules,
but the first few games were a lot of fun. His initial success started Tom wondering
whether he could turn the league into something that would generate more than just a
little extra spending money and new social connections. He figured he had lots of time
to think about that and analyze the possibilities. After all, aside from wanting to buy
a house in the relatively near future, he didn’t anticipate making any major changes to
his life for a few years.

A Very BAd dAy (opportunIty KnocKS)


Tom was having a great summer in 2002. He was playing in his brand new league
several nights a week and meeting new people. Life was good . . . right up until the
sunny, beautiful morning that he walked into the office and found a pink slip waiting
for him. fte structural engineering field in general had experienced significant chal-
lenges post 9/11; layoffs were common, and his organization was one of many letting
people go. ftat afternoon he sat in his favorite pub feeling somewhat sorry for himself
and nursing a second pint. He chatted with the bartender, who occasionally grunted
back in what Tom assumed was sympathy. Tom couldn’t help but vent his frustration.
“Structural engineering jobs are impossible to find right now so I don’t know what
I’m supposed to do,” he complained. He took a lengthy drink from his pint and then
reflected, “But you know, this is the first weekday I’ve had off in more than a year.

2 Case Research Journal • Volume 35 • Issue 2 • Spring 2015

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Maybe this isn’t such a bad thing. ftere’s more to life than an office. People in Europe
have it right; they all get 6–8 weeks of vacation a year. Wouldn’t that be nice? ftat’s
what I want . . . a European lifestyle in Canada.”
Tom thought his quality of life would be much better if he could move overseas
since he had heard a great deal about the more laid back, less work-focused lifestyles
there. fte practical realities involved stopped the idea in its tracks, but made him
reconsider his goals for Springy Fields. Expanding the company so it was large enough
to provide all his income could allow him to work in the spring, summer, and fall but
take winters off. He realized it could be the means to the lifestyle he wanted!
Tom reflected on how easy it had been to find interested players and set up his
sports leagues. He had thought about making it a full-time concern “someday.” Would
it be possible to ramp up quickly? Word of mouth alone was creating increased demand
in his community, but was the demand enough? And could he generate the volume of
registrations that would be required to make the organization a profitable enterprise
capable of supporting him? Tom didn’t like taking chances without full information.
Like many engineers he believed in careful planning, managing details, and using
control mechanisms to minimize risk. Some aspects of the business, such as the over-
all market potential, were difficult to quantify reliably. Being unemployed, he didn’t
have much else to do, though. His take home severance package of $50,000 would
last for a year, a little less if he invested some of it in his nascent business. Under the
circumstances Tom was willing to risk attempting to run the business full-time; but he
wanted to do so as sensibly as possible. To him, that meant taking careful, researched,
and well-planned steps and expanding at a pace that did not require him to assume
debt. If the business established a track record of consistent, predictable profitability
and cash flow, then the risk of acquiring debt would be significantly lowered and he
could reconsider his options.
Tom talked about it with Janet, his advisor, who suggested: “Why don’t you just
jack up your prices a bit to ensure you make a solid profit? ftere seem to be lots of
teams interested which implies that there is unsatisfied demand. I think you have a real
opportunity here.” Tom replied:
I don’t know. I’m not sure people will pay much more if you compare this to other
types of sports opportunities. Maybe they would, I’m not sure. But it isn’t all about the
profit anyway. When I watch the teams playing and people getting to know each other,
making friends, it makes me feel like I am helping Springfield become nicer, more like
a small town. I want to keep prices reasonable so that people who don’t make a lot can
still afford to play. I never want anyone to be left out because they can’t afford it.
Tom knew he couldn’t eliminate risk if he made Springy Fields his full-time job. If
he could pull it off, however, he could have an ideal lifestyle—he could make a contri-
bution to his community, support himself, and still take several months off each year.
He had never planned to run winter leagues for two reasons. fte first reason was lack
of indoor facilities and the second was that there seemed to be more recreational sport
opportunities available in winter to compete with him. He attributed that to nobody
wanting to do the work required to maintain these nonprofit leagues in the short sum-
mer season. In summer the volunteers driving these other leagues had other priorities
like cottages and family holidays. ftis lack of summer competition created the oppor-
tunity he needed. He envisioned his so-called “European lifestyle” as within his grasp!

Springy Fields: An Entrepreneur’s Dilemma 3

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All SyStemS go: SprIngy fIeldS growS up
After doing further research, Tom decided to take the plunge. His marketing strategy
in his second year (2003) was the same as his first year—ads in the community guide
and posters in places where active people tended to congregate. In 2003 he grew the
business in three ways. fte local ultimate frisbee league grew from sixteen to thirty-
two teams. Second, he added a beach volleyball league. Beach volleyball was a good
choice since the teams and the “fields” were smaller than in regular volleyball, making
it easier to have multiple courts in one location. People also liked playing in the sand
instead of on a hard court since it made falls and dives much less painful. Finally, Tom
also started an ultimate frisbee league in another community about an hour’s drive
away. It was a lot of work, and although his severance package was adequate to cover
his living expenses, the costs of setting up the business were paid for by savings that
were originally intended as a down payment for his first home. So instead of moving,
his apartment got a little more crowded with the equipment and papers associated
with running a business.
Tom quickly decided that the league in another city was a mistake:
Even though I added a part-time assistant to drive back and forth, make arrangements,
and deliver forms and supplies, my own travel to the second city was still running me
ragged. As I told my assistant, I know we are making money there, but I’m sick of hav-
ing to be on the road. Spending hours driving . . . that’s not why I did this! It is too
much effort to be worth it. I think we need a strategy of one city, one market. Moving
forward next year let’s focus on Springfield alone but do a really good job of it.
Even with the new strategy, Tom calculated that he would be spending about
three hours a day doing administrative work. ftis included sending out e-mails with
the schedule for that week, going to fields to collect score sheets, and responding to
e-mail or phone questions about team standings. As he added more sports, he quickly
realized he would need to increase his hours, add more staff, or automate. Most of
his administrative work was related to moving paper-based information around and
answering the same questions over and over again, so automation seemed the most
logical solution. Tom built a website that allowed customers to get general informa-
tion (including answers to frequently asked questions), check schedules, and check
the standings online. It was a huge hit with all his customers—from the young, single
adults who made up the majority of players, to the parents with young children and
the fifty-year-old couples. fte website also made the whole league seem more personal
since pictures of actual teams, players, and games appeared on the site.
Tom encouraged this “big, happy family” culture because it supported the socializ-
ing and community engagement that he valued. It also helped him avoid the problems
of overly aggressive play and fights common in more competitive leagues. He awarded
prizes at the end of the season for the teams with the best spirit scores, a grade assigned
for sportsmanship and fair play. A team’s spirit score was based on ratings from all the
teams it had played against. Tom was pleased with this idea: “It quickly became a mat-
ter of great pride to win this award. ftis further encourages a friendly standard of play
that allows for informal rule enforcement, ensuring I can continue to run the leagues
without the added expense of referees.”
Beyond outsourcing the entry of scores to his customers and essentially doing
the same with referees by implementing the spirit score, Tom followed this pattern
with respect to timekeeping and general monitoring of the games. ftis was done by

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allowing customers to play for free if they volunteered to be a convener. fte convener
made sure games started on time, that the games lasted the right amount of time, and
that should anybody get injured, first aid was provided and the incident reported.
To help in this regard, Tom provided a stopwatch preset to count down the required
length of the games, as well as a basic first aid kit.
By 2004 Springy Fields was much larger and more established. Due to increased
demand, Tom had expanded the number of teams within each sport and the number
of sports offered. He added flag football to the roster. fte biggest changes, however,
involved beach volleyball. In order to satisfy demand, volleyball was now played on
four nights instead of two. He also offered more variety in terms of skill level with
recreational, intermediate, or competitive levels. Finally, he added a two-person team
volleyball league to complement his existing four-person and six-person team leagues.
Tom’s profitability relied heavily on several factors. One was the almost complete
lack of fixed costs. His new web-focused model made running the business from his
home a practical option. His staff needs were minimal; he continued with just one
assistant in the summer. His advertising budget was low as word of mouth was prov-
ing to be extremely effective. His facilities were primarily rented on an as-needed,
season-to-season basis, although in the past year he had built a handful of small beach
volleyball courts because the city no longer had the capacity to accommodate all the
teams that registered with him. Customers were also proactive about asking for new
leagues and sports, making his market research much easier, not to mention the addi-
tion to revenue, as many customers played on more than one team and/or in more
than one sport.
In response to customer requests, Tom added single day dodge ball tournaments
in 2005, soccer leagues in 2006, and single day disc golf tournaments in 2007. He
mitigated the extra workload early on, making his website slightly more dynamic in
2005. fte new site allowed players to register and input scores online, freeing Tom
from hours of driving around manually collecting score sheets from the fields. With-
out this innovation he would have needed to expand staff beyond his single part-time
assistant, who continued to work only four months per year. fte online score tracking
was a hit with customers, who enjoyed seeing changes in their ranking immediately
upon entering scores.

BuIldIng pArtnerSHIpS
In addition to a strong focus on meeting customer requests, as early as 2004 Tom
began to see community partnerships as a key part of his growth strategy:
Building the beach volleyball courts was my first try at community collaboration. In
2003, knowing I would run out of room for volleyball, I tried to go through the city
and build new facilities in the parks. I got bogged down in red tape in no time. I
figured that it would take about five years to get all the permits and clearances and
actually build. Apparently my application got noticed though, because in 2004 I was
approached by the Catholic School Board. fte administrator explained to me: “We’ve
been wanting to build better sports facilities for our kids on several school properties,
but we really know nothing about how to build these courts or what is required. Maybe
we could help each other out.”
Eventually they agreed that Tom and the schools would each pay half the costs of
building the beach volleyball courts. fte schools would get to use the courts during

Springy Fields: An Entrepreneur’s Dilemma 5

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the day and Tom would maintain them and enjoy rent-free access for five years. Tom
saw this as a win-win because the total cost for him was still less than renting city
courts for a comparable period, plus he had the added advantage of getting the courts
built very quickly. Furthermore, other potential start-ups would have a harder time
gaining access to school courts than city courts. Finally, he was getting a new genera-
tion of customers interested in the sport because the school children would play on
the courts during the day.
In keeping with his spirit of community partnership, Tom organized special week-
end tournaments several times throughout the playing season with all proceeds going
to local charities. fte sports played at these events would vary. For a very modest entry
fee, teams played six games starting Friday night and extending into Sunday evening.
As with the regular leagues, there were prizes for the top team and the team with the
best spirit score. ftis charitable work further enhanced his image and profile in the
local community. As a result, Tom appeared in the local newspaper’s “Top 40 Under
40” list in 2006 and 2008. Tom pointed out modestly that he only JUST made it since
he was almost forty the second time he was nominated.

perSonAl goAlS met And now more to Be loSt: protectIng


SucceSS
fte success of his business enabled Tom to buy a house in 2005. ftis had the added
benefit of allowing him to claim some of his house expenses (e.g., heat, hydro, phone)
as income tax deductions since he ran the company from home. fte downside was
that if Springy Fields was ever sued, his home could be in jeopardy. Still as risk averse
as ever, Tom avoided this problem by incorporating the business in the same year. He
was the sole shareholder and he paid out virtually all his profits as dividends each year.
ftis strategy meant that if Springy Fields Inc., ever lost a lawsuit the only real property
at stake, aside from the $8,000 to $9,000 Tom kept in Springy Fields’s bank account as
a float, would be the amount of profit left in the company since Tom had last paid out
dividends. Based upon how often Tom decided to paid dividends, this amount would
never be more than 25 percent of Springy Fields’ annual profit.
Included in Springy Field’s expenses was a $24,000 salary Tom paid to himself.
As Tom took virtually all of the earnings out of the company, whether it was salary or
dividends made no difference to his personal cash flow before taxes, but such a strategy
was advantageous from a Canadian taxation perspective.

SprIng 2010 And tom’S expAnSIon QueStIon: growIng profItS


wHIle mAIntAInIng prIorItIeS

By the spring of 2010, Tom had 931 teams playing over three seasons: 237 in ultimate
frisbee, 436 in beach volleyball, 187 in soccer, and 71 in flag football (see Exhibit 2).
Registration fees continued to be Springy Fields’ sole source of revenue. In 2009 the
price per team was $400 for all leagues except volleyball. fte size of volleyball teams
ranged from 2–6 players, with fees ranging from $120 per team to $390 per team. fte
weighted average was roughly $300 per volleyball team.
ftings were going so well that in 2010 Tom had to turn a few beach volleyball
teams away due to lack of capacity. He was no longer building new courts. Although
he would have been able to fill additional playing courts during the peak summer

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season, he was very reluctant to create too much capacity, since this might free up city-
owned space for new competitors entering the market. Tom also believed that he was
close to saturating the spring/summer/fall markets for volleyball and ultimate frisbee.
fte number of teams had stabilized and was comparable to other communities of a
similar size with recreational leagues. He was attracting few new participants regis-
tering for those two sports. Interestingly, a number of customers were driving from
different communities an hour or more away because they had nothing comparable
where they lived. ftis applied to all the sports Tom offered.
Tom considered his next move, once again using Janet as a sounding board:
It seems like I should be developing a new growth strategy. I figure I have a few options.
I could look at a winter league but I’d need to find the facilities first. I could expand to
other communities but I would need to think carefully about how to develop the local
relationships I’d need. I don’t want to be on the road all the time so I would have to
hire local employees in each community. Maybe I could just license the whole business
model as some kind of franchise? I could charge an up-front fee for the website and
business model and take a percentage of revenue each year after that. My advice on
organizing and getting in with the local community would be worth something. But
what if people run their franchises badly and ruin my brand?
Maybe I could go a completely different route—stay local but offer specialized coach-
ing or something. I met some high end coaches when I was playing golf with the
doctor from the local sports clinic so I could probably get 3–4 coaches involved from
that group. ftey are pretty busy though, and they have a professional network so they
might not need me to find them customers. Plus that idea also has other problems. I
don’t want to deal with personality conflicts between coaches and customers. Coaching
also caters to a more serious kind of athlete, not people just out to have fun. ftose elite
athletes don’t play in my leagues. Lower risk approaches are what got me here in the
first place, I should probably remember that.
ften on a personal note there’s my girlfriend, Kelly. We’ve been together for some
time now and have been talking about getting married. Beyond wanting to spend time
together and being able to afford a comfortable lifestyle, both of us want at least a
couple of kids, so I have to consider the degree of risk she is willing to take on as well as
any disruption to the work-life balance we currently enjoy. What’s more, she’s a school
teacher so while there is a bit of overlap, she is working when I’m having my down-
time, and vice versa. While it’s not perfect, we still manage to spend quite a bit of time
together; but the real advantage of our current work schedules will kick in when we
have kids! She will be off in the summer and I will be off in the winter so the need for
daycare is minimal and we both get one-on-one time with our children. Saving a few
bucks is always nice, but how many parents do you know that get that kind of quality
time with their kids with no work distractions?
Janet thought carefully before commenting, “It sounds like you need more infor-
mation before you can decide anything. Why don’t you do some research and talk to
Kelly. Once you’ve done that give me a call and we can meet again to put together
some notes that will help you develop some financial projections for the various alter-
natives as well as the nonfinancial implications.”
Tom began researching his options. First he evaluated the potential for a winter
season. Winter created the significant issue of where to play—indoor facilities were
a must when the snow began to fly. fte city already had an indoor soccer facility
where he could run ultimate frisbee, but only on one evening a week. fte other city-
owned facilities were all running at capacity. He simply could not purchase time for his

Springy Fields: An Entrepreneur’s Dilemma 7

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leagues. fte school gymnasiums tended to be a little too short for sports like indoor
soccer and ultimate frisbee. ftere were already several well-established nonprofit win-
ter volleyball leagues, albeit not beach volleyball, which was unfortunate since that was
the one sport with minimal space requirements.
Tom could build branded facilities himself, but this generated other concerns. How
much would it cost up-front? Did he want to take on debt, something he had always
avoided before? Tom also wondered if his customer’s expectations would change once
the company had a physical address as opposed to existing primarily in cyberspace. A
lot of his customers knew where he lived but they seemed to respect the fact that his
office was also his home. Very few people simply “dropped by.” Would they expect
the indoor facility to have a staffed office? If so, what hours would they expect it to
be open? Would his customers be as interested in winter play? Could he count on the
minimum number of teams he would need? How long was he willing to wait to reach
a break-even point on such a significant investment? Tom figured he could attract only
half of his spring/summer customer base due to a mix of nonprofit competitors who
operated only in winter, lack of interest, and people being busy with other activities.
He received an estimate from “fte Dome People” with the initial cost of a sports
dome, and estimated costs for some of the annual expenses he could expect to incur
(see Exhibit 4). In addition, aside from talking with Kelly and Janet, while watch-
ing the beach volleyball games he also conducted a considerable number of informal
interviews with the players. Tom summarized his research findings, his notes from his
meetings with his advisor, and his discussions with Kelly in order to help determine the
cost of the original investment, projected annual revenues and costs, borrowing needs
and payment plan, the cost of borrowing, and other considerations (see Exhibit 5).
One thought that weighed heavily on his mind was how creating a winter season
would require him to abandon his extended annual trip, or hire highly capable staff
who could run the company in his absence. Tom reflected on the tradeoffs:
If I’m going to hire someone anyway why not just expand to another community in
the summer? ftat might be the easier option. But I don’t really want the headaches
associated with managing a large staff so maybe the franchise approach might be better.
A franchisee would be more invested in the success of the leagues than an employee.
ftey would be more motivated to manage the leagues well and have good relationships
in the community. Or would they? I might end up being continually on the road yet
again, going from town to town to address franchisee issues. Or worse still, issues might
crop up with franchisees during my really busy times and the personal service I offer in
Springfield could suffer.
Tom was also having trouble estimating how much people would be prepared to
pay for a franchise licensing fee and ongoing royalties, especially since Springy Fields
was largely a web-based business. ftere were few purely web-based precedents to help
him determine appropriate fee structures. He found one Virginia-based soccer coach-
ing franchise that was somewhat comparable to what he might offer. fte company
offered a package that included brand name usage rights, administrative access to a
web page, and a coaching handbook and instructional DVD. fte one-time license for
a town of any size was advertised to be $7,000 (USD), which was roughly the same
value in Canadian dollars in 2010. Royalties amounted to 15 percent of fees.
Based on his own results (see Exhibit 3), Tom realized that 15 percent royalties
would significantly reduce the franchisee’s profitability to the point where it might
not be worth the investment. Tom thought that for his business, the up-front charge

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should be between $20,000 and $30,000 and the ongoing royalty between 5 percent
and 10 percent. He felt the higher up-front charge was warranted due to benefits
associated with access to his extensive tacit knowledge. To enable optimal sharing of
that knowledge, he would try to limit himself to communities within a two to three
hour drive from Springfield, at least in the short term. ftat probably meant there was
potential for up to eight franchises, but he would have to act fast. Word of his busi-
ness model had gotten out such that single proprietor leagues were slowly but surely
being formed in neighboring communities. As always, Tom did his research and put
together some notes to help him assess the viability of franchising. In doing so, he also
put together some rough estimates of the revenues and costs that each franchise could
expect since, if it didn’t make economic sense from the franchisee perspective, then
pursuing the franchise alternative would not be an option (see Exhibit 6).
Providing coaching referrals was another option he considered, but Tom was not as
informed about the market for this service. Several of his customers had asked if Tom
knew potential coaches. ften there was the community online exchange board on his
web page. So far in his current year of operation, twelve posts could be categorized as
falling into the “looking for coaches” category. He worried, however, that he could
get embroiled in disputes between clients and coaches. He had similar concerns about
starting to sell sports equipment. How would he manage inventory and what would he
do if clients weren’t satisfied with a product? Retail sales was a much more competitive
market and Tom felt he would need unique specialty products to begin to compete
with large box stores. His leagues were filled mostly with casual players, so would they
even buy high end specialty products? Given 1) that these options were somewhat tan-
gential to his core business; 2) that he lacked the appropriate understanding of these
markets; and 3) that he had no readily available data to assess their financial viability,
Tomessentially dismissed these options, at least for the immediate future. However, he
did wonder if he could somehow leverage his website to possibly enjoy sharing in the
profits provided by the retail environment.
Analyzing the financial and lifestyle implications of the various expansion options
created some anxiety in Tom. He once again talked to Janet:
When I started Springy Fields I didn’t have anything to lose. Now that I have a home,
things are different. And there’s marrying Kelly. ftis past year dating her has been
amazing; she is amazing; and we’re both in a good place to start a family. But if I’m
going to have a wife and kids I need to be even more careful. It is tempting to run wild
with my ideas and really try to maximize profits, then I’ll be able to give my kids every-
thing they’ll ever need. After all, that is what success looks like, isn’t it? I’ll be a good
role model. Even so, I’m not sure. I’ve always wanted a low stress life. More income
would be nice but I’m comfortable. With a family I would be even more interested in
time for vacations and stuff. Plus if I’m honest with myself, I really do prefer less stress
in my life.
Tom had taken a risk with Springy Fields at the beginning and he felt it had gone
extraordinarily well. He didn’t want to work too hard, but he certainly did not want to
jeopardize what he had built, either. He was not going to ignore expansion possibilities
altogether, but they had to be able to be integrated with his lifestyle preference and
desire for a soon-to-be growing family. As he considered his options for expansion, he
was very unsure what route to take.

Springy Fields: An Entrepreneur’s Dilemma 9

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Exhibit 1: Ultimate Frisbee Primer
“Ultimate is an exciting, noncontact team sport, played by thousands the world over.
It mixes the best features of sports such as soccer, basketball, American football, and
netball into an elegantly simple yet fascinating and demanding game. To compete at the
top level, ultimate players require an unmatched degree of speed, stamina, and agility.
Yet the simplicity of the rules means it’s easy and fun for newcomers to pick up.”*

Equipment Required: A field, a flying disc, and pylons (pylons optional—used to mark
field boundaries)
Ultimate in 10 simple rules
1. The Field—A rectangular shape with endzones at each end. A regulation field is
64m by 37m, with endzones 18m deep.
2. Initiate Play—Each point begins with both teams lining up on the front of their
respective endzone line. The defense throws (“pulls”) the disc to the offense. A
regulation game has seven players per team.
3. Scoring—Each time the offense completes a pass in the defense’s endzone, the
offense scores a point. Play is initiated after each score.
4. Movement of the Disc—The disc may be advanced in any direction by completing
a pass to a teammate. Players may not run with the disc. The person with the disc
(“thrower”) has ten seconds to throw the disc. The defender guarding the thrower
(“marker”) counts out the stall count.
5. Change of Possession—When a pass in not completed (e.g., out of bounds, drop,
block, interception), the defense immediately takes possession of the disc and
becomes the offense.
6. Substitutions—Players not in the game may replace players in the game after a
score and during an injury timeout.
7. Noncontact—No physical contact is allowed between players. Picks and screens
are also prohibited. A foul occurs when contact is made.
8. Fouls—When a player initiates contact on another player a foul occurs. When a
foul disrupts possession, the play resumes as if the possession was retained. If the
player committing the foul disagrees with the foul call, the play is redone.
9. Self-Refereeing—Players are responsible for their own foul and line calls. Players
resolve their own disputes.
10. Spirit of the Game—Ultimate stresses sportsmanship and fair play. Competitive
play is encouraged, but never at the expense of respect between players, adher-
ence to the rules, and the basic joy of play.**

Quoted from http://www.whatisultimate.com/. Downloaded on November 10, 2013

10 Case Research Journal • Volume 35 • Issue 2 • Spring 2015

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Exhibit 2: Number of Teams by Sport
Springy Fields, Springfield, ON

2006 2007 2008 2009 2010


Soccer 54 77 162 162 187
Flag Football 74 74 75 68 71
Ultimate Frisbee 185 218 247 235 237
Volleyball 240 303 385 431 436

Source: Company records

Springy Fields: An Entrepreneur’s Dilemma 11

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Exhibit 3: Springy Fields Financial Statements
Income Statement ($CDN) for the 12 Months Ending January 31, 2006–2010
2010 2009 2008 2007 2006
Revenue¹ 330,000 306,000 277,000 230,000 174,000
Expenses
Field Rental and Development 110,000 109,000 102,000 77,000 65,000
Salaries² 46,000 46,000 36,000 34,000 24,000
Office Utilities 3,600 3,600 3,600 3,600 3,600
Sports Equipment 14,000 12,500 11,900 8,800 6,960
Marketing/Advertising 8,000 8,000 8,000 8,000 8,000
Insurance 20,000 18,000 17,200 13,000 10,440
Office Supplies 7,000 6,500 6,500 6,500 6,500
Accounting 6,000 5,700 5,600 5,500 5,500
Legal 3,000 3,000 3,000 3,000 3,000
Bank Fees 1,500 1,500 1,500 1,500 1,500
Charitable Donations 4,000 4,000 4,000 3,000 2,000
Total Expenses 223,100 217,800 199,300 163,900 136,500
Income Before Taxes 106,900 88,200 77,700 66,100 37,500
Taxes 21,380 17,640 15,540 13,220 7,500
Net Profit 85,520 70,560 62,160 52,880 30,000
¹ All the leagues cost $400 per team per season with the exception of volleyball. As the side of volleyball teams ranged from 2–6 players,
cost ranged from $120 per team per season to $390 per team per season with a weighted average being roughly $300 per team per season.
² Salaries include $24,000 ($2,000 per month) to Tom Wilson.
Source: Company records

Springy Fields Balance Sheet as of January 31, 2006–2010


2010 2009 2008 2007 2006
Assets
Cash 8,201 8,681 9,121 8,961 9,081
Total Assets 8,201 8,681 9,121 8,961 9,081
Liabilities and Shareholder’s Equity
Liabilities
Accrued Liabilities 1,000 1,000 1,000 1,000 1,000
Total Liabilities 1,000 1,000 1,000 1,000 1,000
Shareholder’s Equity
Paid In Capital 100 100 100 100 100
Retained Earnings—Begin 7,581 8,021 7,861 7,981 12,981
Plus: Earnings 85,520 70,560 62,160 52,880 30,000
Less: Dividends 86,000 71,000 62,000 53,000 35,000
Retained Earnings—Ending 7,101 7,581 8,021 7,861 7,981
Total Shareholder’s Equity 7,201 7,681 8,121 7,961 8,081
Total Liab and Share Equity 8,201 8,681 9,121 8,961 9,081
Source: Company records
12 Case Research Journal • Volume 35 • Issue 2 • Spring 2015

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Exhibit 4: Quote and Estimated Costs for Indoor Facility

February 2, 2010

Mr. TOM WILSON


Springy Fields
Springfield, Ontario, Canada

Dear Tom:
Thanks for dropping in yesterday.
As discussed, I have provided a quote for a year-round facility for 4 beach volleyball courts—basically the
same configuration as a 4-court tennis dome. I have broken out as options a 4-leaf revolving door, vehicle
air lock, and an air conditioning unit so you will know the cost depending on which way you go. These are
not included in the package price. The Energy Estimate is based on having both heating and cooling and
the average number of operating hours we talked about. The structure is quite durable and should last at
least 20 years with adequate maintenance. It should be able to last longer, but that would require some
major renovations and upgrades after the 20 years.
The number of parking spaces required is really a matter you’d have to check with the city, and vari-
ances can often be approved depending on the particular use, but our guess is that a two-acre lot should
provide sufficient space for both the dome and the parking lot. Connections we have in the real estate
sector suggest there are a few spots available that will fulfill your needs at a cost of roughly $225,000.
Additionally, with respect to putting in a paved parking lot, while this is not our area of expertise, on the
occasions when we have been the general contractors overseeing similar jobs, these costs have been
approximately $25,000. If you decide to add lighting in the parking lot, the costs generally double. As far
as annual insurance costs go, it depends on what all you are covering, but you could probably figure on
the $40,000 range. As for property taxes, which will be dependent upon what the final structure includes,
we estimate that they will be roughly $35,000.
Please give me a call with any questions.

Air Structure Package


To supply, deliver and supervise the erection of one 202′ x 118′ x 36′ air supported structure with rectan-
gular ends, including:
1. 28 oz. vinyl coated polyester OPAQUE outer fabric.
2. 15 oz. vinyl coated polyester liner fabric.
3. 34–1,000 watt metal halide light fixtures with single ballasts.
4. 5 emergency exit doors.
5. 5 emergency exit light packs.
6. 1 pedestrian air lock.
7. 1 separate standby unit (standby and secondary fan unit).
8. 1–1.00 million BTU heat and inflation unit.
9. Two change rooms with washroom facilities.
10. Supply and install of membrane insulation.
11. Load calculations and construction drawings stamped by a qualified engineer.
12. Freight to jobsite.
13. On-site supervision of installation of air structure.
14. Start-up of mechanical equipment.
15. 640 lineal feet of retention profile for concrete grade beam.
Package Price: .................................................................................................................. $ 385,000

Springy Fields: An Entrepreneur’s Dilemma 13

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Exhibit 4: continued
Optional Items for the Package Above
a. 4-leaf revolving door .............................................................................................. ADD $6,000
b. 10 × 10 vehicle air lock ........................................................................................ ADD $15,000
c. 30 tons A/C .......................................................................................................... ADD $45,000
Items Which Are Your Responsibility
• Architect’s fees, payment of local taxes, and cost of obtaining permits.
• Concrete grade beam and equipment pads. Our construction division can assist you with pricing,
supervision, and installation.
• Electrical service and natural gas to equipment locations.
• Temporary labor and equipment.
Due to so many unknowns, it is impossible to determine an exact total for these costs at this point. How-
ever, and again based upon our experience, they will range from about $15,000 to $30,000.

Grade Beam Estimate for Package


Based on an air structure size of 202′ × 118′ × 36′, we are pleased to provide you with our budget cost
for the grade beam and pads.
This would include:
1. Reinforced Concrete Beam 24″ wide × 43″ deep, 12″ above grade installed around the perimeter
of the air structure for a total length of 640 lineal feet.
2. Concrete Pads for mechanical equipment and doors.
3. Excavation based on normal soil conditions.
4. 2″ × 4″ needed for anchoring structure in profile.
Grade Beam Price: ............................................................................................................. $ 64,000
($100 per lineal foot of beam)

Please note that this estimate is based on typical conditions. On-site soil and weather conditions, as well
as final engineering calculations may change this number.

Estimated Annual Energy Costs for the Dome


July Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. April May June Total
Motor Cost 617 617 597 617 597 617 617 558 617 597 617 597 7,265
Cooling Cost 1,381 1,356 444 – – – – – – – 444 1,356 4,981
Lighting Cost 761 761 737 761 737 761 761 687 761 737 761 737 8,962
Fuel Cost – – – 160 564 582 582 521 582 160 – – 3,151
Total 2,550 2,525 1,575 1,329 1,695 1,751 1,751 1,582 1,751 1,291 1,613 2,487 21,900

Please call once you have had the opportunity to review this information.
We look forward to your response.
Yours very truly,
THE DOME PEOPLE

Tom Doma
Sales Associate

Source: Company records, from an estimate provided by The Dome People

14 Case Research Journal • Volume 35 • Issue 2 • Spring 2015

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Exhibit 5: Assessing the Indoor Facility Option
Tom’s Notes from Meetings with Janet and Research Findings
Cost of Initial Investment
• Absolute minimum requirements: air structure, grade beam, and land—roughly
$675,000.
• Paved parking lot—must be paved (see below).
• Parking lot lighting—must install parking lot lighting (see below).
• Other options for the dome.
○ The 10 × 10 vehicle lock will allow for vehicle access into the dome, which would
make initial sand installation much easier while providing flexibility should I wish
to repurpose the dome, either temporarily or permanently, for other sports and/
or events.
○ Neither the 4-leaf revolving door nor the 10 × 10 vehicle lock are necessities, but
they would be 6–8 times the price if retrofitted at a later date, whereas the 30 ton
A/C would cost essentially the same if it were installed now or after the fact.
• Given my risk aversion, I would be much more comfortable using the higher value
($30,000) for the costs that are not The Dome People’s responsibility.
Interview Findings
• Two 16 week seasons (September to December and January to April) is acceptable.
• Games should be held 5 nights a week (Sunday to Thursday) in keeping with same
philosophy during spring/summer: people are doing other things on Friday and
Saturday.
• People were okay with games being 55 minutes plus a 5 minute turnover time
between games.
• Games should not start earlier than 6 p.m. and should not end later than midnight
with an 11 p.m. finish time being preferred by most of those interviewed.
• Most people readily accepted that the price would be double what the 8 week sea-
son was, but there was some push back when an additional 20–30% hike was
proposed. While people realized that there were extra costs associated with playing
indoors, many of them still weren’t thrilled; but they also realized that there was no
other facility that provided beach volleyball in the winter.
• Citing personal safety reasons, the vast majority of people talked to were fairly ada-
mant about wanting a paved parking lot that had lighting.
Projected Annual Revenues and Costs
• Price—$720 per team per 16 week season
• Dome insurance, property taxes, and utilities estimated in quote.
• Assume parking lot lighting costs will be the same as the dome lighting costs.
• If I choose to hire a student versus staffing the dome myself on game nights, I would
probably hire someone for $12.50 per hour plus an additional 20% for benefits.
Minimum wage is presently $10.25 per hour and employers can expect at least an
extra 15% due to statutory benefits.
• There will be an array of smaller costs for janitorial services, snow removal, dome
maintenance and the like that will inevitably amount to a substantial amount of
money. Based upon some preliminary estimates, I anticipate all of these amounting
to roughly $25,000, which may be slightly on the high side.
Down Payment
• By the time payment is due, I will be able to put down $100,000 up-front.

Springy Fields: An Entrepreneur’s Dilemma 15

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Exhibit 5: continued
Repayment Plan
• Due to my preference not to have debt, all cash generated from the dome facility will
be used to pay down the loan principal balance at the end of the year.
• There is also always the possibility of paying down the loan faster using some of the
profits from my regular spring and summer business.
Interest Rate
• Based upon putting $100,000 down, I could get a 5 year mortgage at 6%. I would
consider this to be my cost of capital.
Other Financial Information
• For both reporting and tax purposes, depreciation will be calculated using the
straight line method based upon a 20 year life with no salvage value.
• My small business tax rate is approximately 20% and that is unlikely to change.
Other Considerations
• The time required to complete this project from the acquisition of the land through
to getting the required permits and building the structure will be approximately 18
months.
• Despite the possibility of being heavily involved throughout the entire process
myself, the travel will be limited to Springfield.
• Once the dome is built, my time commitment should drop to virtually zero as it would
just be a matter of monitoring the leagues. This presumes that it is a complete suc-
cess from the outset such that I don’t have to spend time and/or money drumming
up demand or finding alternative uses for the dome space if the leagues don’t fill up
as anticipated.
• Kelly has told me that the decision is ultimately mine since it is my business. How-
ever, she has also said that if the projections don’t initially pan out, she is more than
willing to contribute more than her fair share towards our shared personal expenses
as well as provide her savings (approximately $100,000) if additional working capi-
tal is needed. She has also offered to put this money towards the down payment.
• Kelly also likes the fact that, despite the initial disruption to my work-life balance and
our ability to spend time together, this aggressive expansion strategy means that I
won’t have to be away from home.

16 Case Research Journal • Volume 35 • Issue 2 • Spring 2015

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Exhibit 6: Information to Assess the Financial Viability of Franchising
(From Both the Franchisor’s and Franchisee’s Perspective)

Initial and Ongoing Costs


• Developing the Franchise Agreement will cost approximately $40,000.
• Given some of the distances involved depending upon what communities/people
are awarded a franchise, I would anticipate incurring substantial travel costs while
setting up the franchises as it would make more sense to stay in a hotel as opposed
to driving back and forth. Therefore, in the first year I am guesstimating a total of
$4,000 per franchise for all travel-related costs.
• After the first year, I envision the travel costs dropping to $2,000 per franchise.
Franchise Fee and Royalties
• Due to the substantial up-front costs for legal fees and travelling, I will charge a
$25,000 up-front fee. This higher up-front fee will hopefully attract only those fran-
chisees that are highly motivated.
• The ongoing royalty fee will be 9% of franchisee revenues.
• I anticipate going for three franchises immediately.
Franchisee Revenue and Cost Assumptions
• I estimate that each franchise will generate $125,000 in the first year, increasing
by $75,000 in year two, a further $50,000 in the third year, and a further $25,000 in
year four after which it will remain flat.
• Exclusive of royalties to me, the variable costs will be 47% in the first two years and
45% thereafter.
• Exclusive of the franchise fee to me in year one, fixed costs will be $30,000 in the
first year, $40,000 in the second year, and $50,000 thereafter.
• Presuming they incorporate, each franchise should have an income tax rate of 20%.
Other Considerations
• The time required to finalize the franchise agreement, pick the communities and
franchisees, train the franchisees, and develop appropriate plans for each commu-
nity will be approximately 18 months.
• Developing three franchises simultaneously will probably mean being on the road
almost continually during the 18 month startup phase.
• Once the franchises are up and running, there may still be some substantial time
commitment required in terms of both travelling and actual work until the franchises
are more established and the franchisees are more comfortable running their busi-
ness relatively autonomously. I estimate that this might continue for another 18 to
24 months.
• Given the limited expense and lack of debt in the franchise option, Kelly’s financial
support shouldn’t be needed. However, setting up the franchises will require con-
siderable travel up-front and for the foreseeable future, which Kelly isn’t too happy
about since it might mean postponing starting a family until I can be around Spring-
field on a more regular and consistent basis.

Springy Fields: An Entrepreneur’s Dilemma 17

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