Developing and selling point of sale systems (POS systems) in a time when technology was

being introduced into the market had a lot of potential to grow. YP, whose job it is to evaluate
thousands of businesses and business plans, saw the vast potential this idea had. This
technology had the ability to apply to different market segments and there were very few
competitors. Alan had the market knowledge and sales experience with POS systems. He knew
what the original technology lacked that could be improved with the new system and he had
his positive reputation with potential customers already. However, Alan had zero capital to
invest in and his behavior was sporadic.

If I was in YP’s shoes, I believe that I would pursue this venture. Given that YP will be out of a
job with the assumption that he will need to find a new income source, this is a lucrative
opportunity that he shouldn’t pass up. There is a lot of growth potential and opportunity to
take market share if the product is right. Having Alan as a partner is key to the success of the
product because Alan has experience and knowledge due to his previous venture. Alan was the
one who brought the idea to YP’s attention. Therefore, he deserves to be a partner. However,
the equity should be split according to the risk and contribution. Since YP is the one investing
the capital for this venture, YP deserves majority ownership.

Based on YP’s projections, if sales reached $3 million, pretax profits would run between
$300,000 and $600,000. The two engineers would be salaried employees so that the employees
can continue to program other POS according to the market segment that was being targeted
after the initial POS system is designed for dry cleaners. This would maintain the ability for YP to
continue sales while developing the next POS system for other retail stores. Alan’s role in the
company would be to help design POS systems and sales due to his experience at Freedom and
his likeability with previous customers, who said they would purchase the new POS system.
Given the projections and investment needed, YP would be able to recoup his initial investment
in a few years depending on the salaries given and taxes. If I was YP, I would propose a 75/25
ownership stake of the company between himself and Alan.