# A larger customer—or room to grow? **Fictional small-business scenario.** All names, prices, volumes and terms below are invented, stipulated inputs for this exercise, not market evidence. Currency is USD. No external research is needed. ## The owner's decision Maya owns ClearFold Laundry, a commercial laundry serving independent restaurants, salons and small accommodation businesses. Should she accept a hotel group's full-service contract, seek a smaller allocation, or decline and keep capacity available for existing customers and gradual growth? Other approaches are welcome if their required agreements and costs are made explicit. Today is September 1 in the fictional planning calendar. The full offer expires September 8; service starts October 1. The hotel will answer a written alternative proposal by September 6. All setup can be completed by October 1 if agreed by September 8. Do not infer hiring or equipment lead times beyond these stipulated facts. Maya wants dependable additional earnings without missing existing deliveries, exhausting cash or routinely working weekends. She is willing to trade some profit for resilience, but has not assigned a dollar value to that preference. ## Common accounting and service assumptions Evaluate the **first 13 service weeks**, including one-time setup costs. Separately discuss commitments and opportunities after that period without inventing a later demand forecast. - Pounds mean finished laundry returned to customers. Rewash and ordinary loss are already included in the costs and capacities below. Do not subtract waste again. - Weekly existing workload is 6,000 lb in nine ordinary weeks and 7,000 lb in weeks 4, 5, 9 and 10. These are committed volumes for this exercise. Hotel peaks coincide with those four weeks. - Existing customers pay $1.80/lb; avoidable processing and delivery cost is $0.90/lb. Existing fixed costs are $4,400/week, including Maya's normal salary. Existing customer cash receipts arrive in the same week as service; all existing costs are paid that week. There are no other baseline cash movements. - Normal in-house capacity is 8,000 lb/week. A confirmed overtime arrangement adds up to 1,000 lb/week, for a hard total of 9,000. Overtime adds $0.35 for each pound above 8,000, on top of the relevant base processing cost. Extra work can be scheduled without Maya working weekends. - The hotel work's base avoidable processing and delivery cost is $0.85/lb. Its additional weekly account cost is specified below. These are incremental to existing fixed costs; do not count them twice. - A qualified partner has reserved up to 1,000 lb/week of overflow capacity in the four peak weeks only. Its all-in charge is $1.40/lb, replacing—not supplementing—the $0.85 in-house base cost for those pounds. No overtime surcharge applies to outsourced pounds. The hotel permits this partner; ClearFold remains responsible for quality and service. No other overflow is secured. - All weekly costs are paid at the end of the service week. No price inflation, tax, borrowing interest, depreciation or capital purchases need modeling in this 13-week exercise. - Existing customers cannot be dropped or have their agreed turnaround extended during the 13 weeks. The hotel has the same turnaround requirement. For this simplified exercise, the stated weekly capacity is schedulable within those turnaround promises; daily routing is not an additional hidden constraint. ## Option A: accept the full hotel contract This is a written offer, available now: - 2,500 lb each ordinary week and 3,000 lb each of the four peak weeks, at $1.50/lb. - Those volumes are both guaranteed paid minimums and enforceable maximums during the first 13 weeks. Above-cap requests may be refused without penalty. - $250/week additional account administration and quality-control cost; $4,000 one-time setup, paid immediately before week 1. - Invoices are paid exactly four weeks after the service week: week 1 is paid at the end of week 5, and week 13 at the end of week 17. No deposit or credit line is currently agreed. - The contract runs for 26 weeks, with no convenience exit. In weeks 14–26 the same price and a 2,500 lb/week paid minimum continue; the 3,000 lb cap also continues. Actual volumes and the existing customer workload after week 13 are not forecast. The overflow partner is not yet reserved for that later period. - Maya must maintain service throughout the term. Serious service failure could lose the account; no specific damages amount is stipulated. ## Option B: request a smaller ongoing allocation This is a proposed alternative, **not an accepted offer and not a trial that automatically expands**: - Maya proposes 1,500 lb per ordinary week and 1,800 lb in the four peak weeks, at $1.60/lb, guaranteed and capped on the same basis as A for the first 13 weeks. - $180/week additional account cost; $2,500 setup before week 1. Payment timing is identical to A. - Proposed term: 13 weeks, with renewal only by mutual agreement. There is no right to the hotel's remaining volume, which it would place elsewhere. The hotel prefers one supplier and may reject the split. - If B is rejected by September 6, A remains available until September 8. Do not assign a probability to acceptance. ## Option C: decline the hotel work Keep the existing operation and pursue smaller customers. Two prospects could each add 400 lb/week at the existing $1.80 price and $0.90 avoidable cost, with same-week payment. Neither has committed or provided a start date. They must not be included as guaranteed revenue. The sales effort fits Maya's normal working week. No new fixed cost or setup charge is expected for these two prospects. ## Cash, resilience and owner preferences - Unrestricted cash immediately before setup is $22,000. Maya wants it to remain at or above $10,000 at every week-end, including setup immediately before week 1. No personal cash injection or borrowing is available under current arrangements. - Treat that floor as a hard decision constraint unless Maya explicitly agrees to change it; the council cannot waive it for her. - For the agreed-payment case, receipts due that week arrive before end-of-week payments. Also test a **two-week delay to every hotel payment**, with amounts unchanged. This is a stress case, not an assigned probability or an allegation about the hotel. Existing customer payment timing stays unchanged. - Any proposed deposit, faster payment, different price, capacity reservation or other revised term is a negotiation request, not an available resource. State what must be agreed before commitment. - The operation has no separate spare production line. The given capacities assume normal reliability; no quantified breakdown probability is supplied. - Maya has eight hours total before September 8 for negotiations and decision preparation. A focused hotel call and written proposal can be completed in two hours. She does not want a long research project before deciding. ## What the recommendation must address Choose a course and explain the important trade-offs. Distinguish earnings from cash availability; make the capacity and payment assumptions visible. State which conditions must hold before signing, what would change the recommendation, and what to do if requested terms are refused. Give one practical first action within Maya's available time. Do not invent market rates, customer probabilities, financing, or guaranteed future sales. Where the supplied information cannot settle a material issue, keep it conditional rather than silently filling the gap.