The Offer Letter and the Repair Bench
Thabo, 20, repairs mobile phones from his bedroom. Over the past eight months he has averaged 13 repairs a month, charging about $35 for labour and parts, of which $8 goes on parts. He has $3,200 in savings and keeps no written records - 'I know what I made,' he says. A local electronics shop has offered him a job as a technician: $850 a month, 45 hours a week, starting in two weeks. His uncle will rent him a lockable kiosk near the taxi rank for $450 a month including electricity; shelving and security grilles would cost $1,100 once-off. Transport to the kiosk would add about $60 a month. His mother says take the job. His best friend says a real entrepreneur would take the kiosk.
1. Using the figures given, work out how many repairs a month Thabo would need at the kiosk to earn as much as the shop's $850 salary. What does the answer suggest, and what is the biggest weakness in the calculation?
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Step 1 - Contribution per repair. $35 price − $8 parts = $27.
Step 2 - Monthly fixed costs at the kiosk. $450 rent + $60 transport = $510.
Step 3 - Repairs needed to match the salary. Kiosk profit = 27 × Q − 510. Set it equal to $850: 27Q = 1,360, so Q = 50.4, about 51 repairs a month. That is roughly four times his current 13, or about twelve a week instead of three.
Step 4 - Break-even. 510 ÷ 27 = 19 repairs just to cover the kiosk. At his current 13 he would lose about $159 a month ($351 − $510), and the $1,100 fit-out would come straight out of savings.
Weakness: the 13-repair figure is memory, not records. Peak periods near exams and in December may pull the average up, but he cannot prove it.
Judgement: on the evidence available, the salary pays far more and carries less risk. The kiosk only makes sense if he can show demand would more than triple.
2. Thabo's friend calls the kiosk 'the entrepreneurial choice'. Assess that claim using what you know about entrepreneurial characteristics and risk.
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The friend has confused risk-taking with gambling. Entrepreneurship involves calculated risk: gathering information, testing assumptions and limiting exposure - not committing $3,200 and a once-off $1,100 on a guess.
Characteristics that actually apply here:
- Information seeking. Thabo's first entrepreneurial act should be to record every job for a few months. His problem is not courage, it is data.
- Opportunity recognition. His existing 13 repairs a month is real evidence of a market, but it is small evidence.
- Initiative and persistence. He already runs a business alongside studying; that is genuine enterprise.
- Willingness to be self-employed is not the same as impatience. Waiting one year while building capital and a customer base is a legitimate entrepreneurial strategy.
His mother's view carries weight too: with no records, no reserve beyond $3,200 and a fixed rent, a bad term would take the kiosk and the savings. Taking the job, repairing in the evenings and weekends, and keeping records for three months is the more entrepreneurial option, because it buys information at low cost.
3. Recommend a three-month plan for Thabo and state two specific developments that should make him change course.
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Recommended plan:
- Accept the technician job - it gives $850 a month, technical training and access to supplier contacts.
- Keep repairing part-time and keep a simple record of every job: date, device, fault, price, parts cost and hours taken.
- Bank the difference - save at least $400 a month, so that by month four he has about $4,400 plus the $3,200 he already holds.
- Ask the uncle for a three-month trial at reduced rent from month four, with a written agreement, rather than signing a long lease now.
Change course if:
- The records show 35 or more repairs a month consistently, with customers being turned away, and the December and exam peaks are strong. That would justify a kiosk, since 35 × $27 = $945 comfortably covers $510 of costs.
- A repeat contract appears - for example a school, a security firm or a taxi association wanting phones and radios serviced monthly. Guaranteed volume changes the risk calculation entirely.
Change course the other way if: repairs fall below 8 a month for two consecutive months. That signals the market is shrinking, not growing, and the savings should be kept for a different opportunity.