The big wash

Henry Gibson a 68-year old retired clerk. Enjoyed setting on his front porch on Belmont Street in Washington, D.C, in the evening watching his neighbours.

But the sight of them dragging their laundry to two coin-operated laundries a half—mile on each side of him caused him distress. With no business education or experience, nevertheless he had an idea: why not start a laundry in the neighbourhood?

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Gibson knew he could not do this alone, especially raising the $ 250,000 needed to set up the new venture. So he sought the help of an advisor with a non-profit group located near him.

Together they formed the Belmont investment group (BIG), and started selling 300 shares at $ 100 per share. Many investors came from the community where Gibson lives. Some bought one share only and others bought up to 50.

Once the two partners has sold 600 shares ($60,000), they were able to raise another $ 60,000 in grants from local foundations. With thisbacking ($ 120,000), the two men were able to get a loan from a local bank and a District of Columbia government agency for a total of $300,000.

The laundry opened in a well-designed and refurbished building on the same street where Gibson lives. The laundry was located in an inner city location where crime rate and robbery is high. However, even without bars or roll down iron fences, the business was not robbed or vandalized three years after it first opened. The laundry has much going in its favour, especially the official criterion of success: a densely populated neighbourhood, with lots of kids and renters.

The laundry has 30 washers, 28 dryers, and 8 staff members, the laundry is generating $ 20,000 a month. This puts it in the top ranks of all 35,000 self-service laundries in the United States.

Since its opening, each of the laundry’s shareholders has received $ 175 back on his or her $ 100 investment. For most of them, this is the first experience receiving dividend checks, which are issued quarterly by the investment group (Laundry).

Answer all the following questions:

A: based on the case above, and in light of what you learned in the B205A module, evaluate Mr. Gibson’s approach to starting a new business in terms of idea generation and venture creation.

B: based on the case above, and in light of what you learned in the B205A module, discuss the sources of funding used by Mr. Gibson to raise money to start his new business, and assess whether he could have used additional sources.

C: how do you explain the fact that the laundry has not been robbed?

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