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CASE STUDY:

A TECHNICIAN DECIDES TO OPEN HIS OWN BUSINESS Since his
childhood Ferenc has been crazy about cars and is always reading
books about different types of vehicles. His father, József was a
car mechanic. After Ferenc finished primary school he often helped
József and wanted to follow the same profession as his father.
During his time at secondary school, in the evenings and weekends,
he helped fix cars at a friend’s garage. In this way he gained some
experience and earned a bit of extra money. After finishing
secondary school, Ferenc started to work in a car repair shop in
Debrecen, Hungary. Ferenc liked his job and he was a very reliable,
quick and ambitious employee. After two years, in 2001, when Ferenc
was 21 years old, he got a job at ‘Egres Klima’ (meaning Gooseberry
Airconditioning Services), a company which installed and maintained
air-conditioners. It was a small company with 12 employees,
established in 1999 and with a turnover of €86,000 in 2001. When he
started working at Egres Klima, he was attending vocational
training courses specializing in airconditioning technology. All
these classes were paid for by the company. After three years, he
was awarded employee of the year and after a while he was promoted
to interim boss. He had a very nice office and a good salary but he
felt that he was the only one with much technical experience. He
continually had to help his colleagues and sometimes was working
day and night in order to finish the work. Egres Klima was managed
by two people. There were frequent disputes between them and in
many cases they could not agree on important decisions. Ferenc felt
that he was always in the middle and he grew tired of the stressful
atmosphere. He also noticed that except for two or three of them
most of the workers were not motivated and they could not solve
many of the technical problems that occurred. At that time, he
began thinking of starting his own business but did not have the
courage to leave his job and start something risky. There were 4 or
5 other players in the market, all of them small companies. Air
conditioners were becoming popular but most people could not afford
them. Having observed the market for a year he knew that the
potential competitors (including the company he was working for)
would not pose a big threat for him, so he decided to start his own
business. At the same time Ferenc began secret discussions with
three or four of his colleagues about them joining him. Ater a
while, they all confirmed that they would work with him. In 2005
they left Egres Klima and founded a new organisation called
‘Tölgyfa Klima’ (meaning Oak Air-conditioning Services). It was
financed by a loan from the bank. In order to secure the loan,
Ferenc had to take out a mortgage on his house. A small office
building was rented on the outskirts of Debrecen with a meeting
room and a small kitchen as well as a big warehouse to store the
machines and tools. At the beginning there were only seven
employees but then a good friend of Ferenc with management
experience agreed to join him as manager of Tölgyfa Klima. Two
secretaries were also hired. One was given the role of informing
customers about the technical advantages of each product (customer
relations) and the other person was responsible for the financial
side of the business. Three technicians were part of the team as
well. Tölgyfa Klima only targeted businesses as customers. Most of
Egres Klima’s business customers who already knew Ferenc and his
professional background moved their contracts to Tölgyfa Klima.
These were mostly big businesses. The services Tölgyfa Klima
offered were mainly connected to ventilation technology and
specialized tasks, such as assembly, full interior construction,
repair and installation of car air-conditioners and refrigeration
systems. After installing these machines, Tölgyfa Klima offered a
maintenance service. The company had long- term contracts with many
multinational enterprises and was responsible for the air
conditioning and heating systems of most of the Hungarian
subsidiaries of these big businesses. With time, there was also an
increasing amount of work in Budapest, where most of the
international companies had their headquarters. Tölgyfa Klima was
expanding. In 2008 the company had long term contracts with 18
different international enterprises and a turnover of €150,000. As
the work increased, additional staff were hired. Some of these were
self-employed or subcontracted but most of them were full-time
employees. Within five years 10 technicians had been hired in order
to manage the workload. Also there were always one or two students
working for the company on six-month contracts. The problems began
at the end of 2008 when the economic crisis started to have an
effect on businesses. With the exception of one multinational
company, all of the business partners of Tölgyfa Klima had
financial problems. As the maintenance of the air conditioning
system was not their biggest concern, they did not pay the bills or
could only pay in part. Because these businesses made up most of
Tölgyfa Klima’s customers the company was very dependent on them.
There were also problems with management. The manager of Tölgyfa
Klima left the company for personal reasons. Since Ferenc did not
yet have the right skills to lead the company and was also busy
with the technical work, they had to find somebody with good
management skills as soon as possible. This was not easy. The
previous manager was a good friend of Ferenc and so he was able to
trust him completely. Ferenc decided to wait and take his time
choosing the right candidate to replace him. Time was passing and
even though he held many interviews there was no ideal applicant.
“Our customers could not pay their bills and neither could we. We
had no cash-flow. I thought it was the end. I had to fire two or
three persons and make contracts for payment in instalments with
our biggest business partners. It was very stressful and we had to
live on a day- to- day basis. Some of the smaller business
customers went bankrupt so even though they owed us a lot of money,
they could not pay the whole sum. We had to record it as an
irrecoverable debt in the accounts. More and more of these appeared
in the books and the only advantage of not having profit was to pay
less tax,” explains Ferenc. Tölgyfa Klima had to work out how to
solve this cash-flow problem. The only feasible solution was to
open their services to private customers in order to expand the
customer base. However, the problem with private customers was that
even though they were many, the company could not obtain as much
profit as with business customers. The private services covered
such as things as repairing air conditioning systems in vehicles,
installing air conditioners in apartments etc. The turnover was not
as high as in previous years. In 2008 and 2009 the business was
making a loss and had to ask for extensions on the incoming
invoices. There were many promises from the customers’ side to pay.
However, most of them did not and some of them are still pending.
Page | 35 Tölgyfa Klima continued to work for the multinational
companies even without pre-financing. This was Ferenc’s decision.
“Once we thought we would have to close the company. But then in a
couple of days one invoice was paid by a big customer and so we
could pay some of ours. The cash flow was fluctuating wildly,” says
Ferenc. “The only thing we could do was to wait until the crisis
passed by,” adds one of the workers. Meanwhile Ferenc was contacted
by Péter, one of his friends who was a manager at a big company. He
had the relevant background, with six or seven years of experience
in managing a medium-sized company, and was looking for a job.
Ferenc was very interested so he interviewed him and in the middle
of 2009 Péter was hired as Tölgyfa Klima’s new manager.. “He was a
very good manager. Many Excel sheets and new software tools were
introduced. It was like a revolution in our system. As a person he
was very friendly and knew how to be nice but also strict as our
boss. It took a lot of work to change the administration system but
it was crucial to do it,” says Maria, the secretary. For example
before Tölgyfa Klima introduced Excel sheets, data had to be
inputed in three or four different files. Nobody recognised that
with a link it could be more efficient and less time consuming to
input data. Also the tasks and timetable of the technicians were
written on paper and put in a table. Papers were often mixed up and
left there even if the task had been accomplished. The old system
was confusing for everybody. Péter changed this scheme to an online
calendar which showed the planned tasks for each person for each
day. It was updated by the staff whenever a job was finished or
delayed. Péter was very committed to Tölgyfa Klima and Ferenc was
satisfied with him. Péter tried to balance the risk by keeping only
the most reliable business partners and including more private
customers. Ferenc learned a lot of good practice from the new
manager. Suddenly, at the beginning of 2010, Péter decided to leave
Tölgyfa Klima because he received a very attractive job offer.
Ferenc knew that Péter had done his best to improve the management
of Tölgyfa Klima and was very thankful. He decided to manage the
company himself as he had learned many things from the last two
managers of Tölgyfa Klima. “I made the right decision when I
started the company. I had no business education so I decided to
hire managers. Over time I have learned a lot from them and now I
am able to manage my own business. I like being the boss and make
decisions. Now I am planning to sign up for evening classes in
management. I know the practical side but I am eager to learn more
about the theoretical background,” says Ferenc.

Q1: a) Do you think Entrepreneurial education is
important for the success of entrepreneurial venture?

Q1: b) Reading case study what do you think
characteristics required for an entrepreneur to be
successful?