Business and Information Technology (Revision)

Running head: BUSINESS INFORMATION TECHNOLOGY

Business Information Technology 2

Business Information Technology

Name

Institution

Introduction

( Option 1 One paragraph talks about the advantage Second paragraph talks about the advantage ) Firms are faced with various decisions in the face of negative cash flow as the case of VOIP2 Biz, Inc. There are various options available when company is faced with cash flow challenges such as closing down business, selling the company or seeking other partnerships. However care should be taken in deciding upon these options as they also affect the investors in the company whose interests should be protected at all times.

Staying with the current plan

This refers to the firm sticking to its plan despite the negative cash flow. If investment in a company has the potential to grow then the firm should continue with business (Soro, 2006).VOIP2 Biz, Inc has come a long way in its quest to expand into the market. In its Phase1 it managed to gain entry into the market and acquired about 22 customers and also managed to test and setup its networks. Making losses is common for most startup companies therefore it may take some time before they break even or even make profits. The firm is a going concern and there is a potential for it to make money in future. VOIP2 Biz Inc is most likely going to succeed in the market with because; Firstly if offers low cost solutions to businesses in the area unlike other providers. VOIP2 Biz, Inc uses low cost open source IP PBX platform that combines both the functionalities of voice and data networks that are currently two separated networks in the market. Secondly the recurring income from the clients is substantial therefore the company is assured of some revenue and the more the customers the more the revenue. Thirdly the company will solve customer service issue in the market where traditional providers have failed to offer good services the customers feel underserved. Fourthly the company has potential in that the market for VOIP is vast especially the small enterprise where VOIP2 Biz Inc has chosen to major in. Finally the company offers affordable business solution since the technology already exists therefore it would not be costly to install. The company has potential to make it big time in the industry despite the sales cycle being long the acceptance rate is on the high. With its plan for expansion and having an elaborate marketing plan the company can seek money from other investor and cashing out the existing ones.

( Option 2 One paragraph talks about the advantage Second paragraph talks about the advantage )Closing down the company

( Option 3 One paragraph talks about the advantage Second paragraph talks about the advantage ) The option to closedown sometimes is necessary to prevent further losses from being incurred and increase the value of the company in turn(Soro, 2006) . This option is not viable simply because the VOIP2 Biz, Inc Company is in its early phases and it would be wrong to shut down operations. Closing down the company will lead to loss of investors’ money, loss of jobs and also disruption to existing customer services. The company has already made crucial early steps such as acquiring about 22 customers and establishing reseller and providers’ networks as per phase 1 targets. The disruption of services to the existing clients is a liability to the owners and closing down means that the customers will be left hanging without a substitute to provide them the same services. Besides the existing customers are content with the provision of services .The Company has managed to meet their targets of they had set for its phase1 therefore other measures such as cutting down on expenses to turn around the cash flow. The company has a lot of potential therefore shutting it down after short duration is not a step in the right direction.

Selling the company

Selling of a business majorly depends on its profitability, the size of the business and availability of the buyer. The major hurdles being determining the value of the company, whether selling is the right decision and how to sell it (Battisti & Okamuro, 2010). In the case of VOIP2 Biz, Inc it already has two potential buyers who have same interest in the market but the challenge is the value of the company and if the decision to sell is right. The customers onboard at the VOIP2 Biz, Inc can guarantee enough revenue for the entire contract period meaning the company is not entirely valueless. However, the investors still risk losing their investments should the firm be valued less.

( Option 4 One paragraph talks about the advantage Second paragraph talks about the advantage )Slowing down the rate of growth

( Option 5 One paragraph talks about the advantage Second paragraph talks about the advantage ) Growth of accompany needs to be sustainable for it to be meaningful. Rapid growth is considered unsustainable most of the time especially when a company is relying on external funding for its expansion. Should the funding stop then the company is at risk of collapsing (Bachmann & Bayer, 2013). Voip2 Biz, Inc has planned to expand beyond Indianapolis despite having made huge losses in the past one year. The firm should therefore first focus on its local development and establishment before venturing into other markets. Slowing down growth means that the company will require less funding in the short term and will lead to the company breaking even instead of the rapid growth that requires massive funding and expenses. VOIP2 Biz, Inc should first mitigate its losses in the Indiana area before looking to expand into the Midwest area because more expansion means setting more infrastructure hence more expenses. The company should first stabilize its Indianapolis operations before seeking to expand further.

90 day extension

Extension allows the company to turn around its cash flow. The company could do this through intensive marketing to bring on board more customers, cut down on its expenses or collect outstanding debts from customers (Soro, 2006). VOIP2 Biz, Inc Company received a huge pending deal with a call center that has an offer of about 300 lines up and above the normal 100 lines that they do. This means they will get a lot of revenue from the deal and this may make a difference in their revenue stream. This could turn around their cash flow and make the company break even should the deal be successful. The company could also do more marketing and this could increase their customer base plus they may also manage to close other pending deals.

( Option 6 One paragraph talks about the advantage Second paragraph talks about the advantage )Reduce expenses

( Option 7 One paragraph talks about the advantage Second paragraph talks about the advantage ) Cutting costs is reducing expenditure therefore increasing amount of revenue. This is a strategy used by most companies to increase their profitability (Soro, 2006). VOIP2 Biz, Inc can cut down costs by lowering the salaries of the top management. A pay cut will mean reduction in the operating expenses without affecting cost related to sales and this will lead to substantial increase in revenue. This reduction of expenses will increase revenue and the company could break even as a result.

Other possibilities

The firm could also look into forming partnerships with other firms. With partnerships the firm could easily pool resources together for expansion. Aside from just pooling resources together they could also share expertise and skills (Reed & Reed, 2009). In the case of VOIP2 Biz Inc, the company could partner with other likeminded established companies in the field to assist it gain market share and this could lead to improvement of cash flows.

References

Bachmann, R., & Bayer, C. (2013). ‘Wait-and-See’business cycles?. Journal of Monetary Economics, 60(6), 704-719.

Battisti, M., & Okamuro, H. (2010). Selling, passing on or closing? Determinants of entrepreneurial intentions on exit modes. Determinants of Entrepreneurial Intentions on Exit Modes (November 18, 2010). Massey U. College of Business Research Paper Paper, (27).

Reed, A. M., & Reed, D. (2009). Partnerships for development: Four models of business involvement. Journal of Business Ethics, 90(1), 3-37.

Soro, A. (2006). Evaluating IT investments within corporations–real options Approach.