Crisis at a Local Barbershop

Introduction It was April and the azaleas were blooming everywhere in Longview, TX, but Tim Peterson was not enjoying the beauty around him on his day off. He was looking at sales at his one-person barbershop and was very frustrated. He simply did not know what to do--he had bills to pay and little in his checking account. He had built a successful business enabling a comfortable lifestyle and been in the same location for ten years with as much business as he could handle for pretty much the entire ten years. Revenues had fallen off by 50% in only three weeks and he knew his business was in dire trouble. This had never happened before--sales had not fallen that far and that rapidly in his years at the same location. The customers were just not coming through the front door now that a new barbershop had opened up only a couple of blocks away. They also offered an introductory price of $12, which was $2 lower than what he charged. This was serious! Background The new barbershop appeared to be siphoning off a tremendous amount of his business and things simply could not continue on the same trajectory. Thinking back, Peterson knew that his waiting room of six chairs was often full and that many customers had to wait 45 minutes, or even up to 2 hours, for haircuts. One customer even suggested he sell t-shirts marked with "I Survived the Wait at Tim's." He had to assume that the long wait times were at least part, if not most, of the reason that many of his customers had left. However, Peterson also believed that he gave the best haircuts in town for the price. Would the customers that had left come back to him when they needed their next haircut in 3 to 5 weeks? What could he do about the wait times IF business did pick up to the levels they were at three weeks earlier? One option was to remodel the space and bring in a second barber, which might reduce the average wait times. However, he thought that this might not be easy to do since it was very difficult to get the right person and he would have to remodel the shop. There may also be additional issues in hiring and training another barber that he had not yet thought of. Peterson noticed his jaw ached and then realized he was clenching his teeth. Tim Peterson had a bachelor's degree in accounting from a nearby university. He then worked as an accountant in the health care field for ten years, even working his way up to comptroller. However, he had hated working as an accountant. When he was laid off as a result of a merger, Peterson decided to go to barber school to learn to cut hair. He thought he would work temporarily as a barber, working only until he figured out what he was going to do with his career and his life. However, he found that he enjoyed cutting hair and building relationships with customers, some of whom became friends. Looking back, he realized that he had now cut hair for over twenty years. Ten years ago, he opened up his own barber shop and found a small space in a retail center at the intersection of a four lane highway with fairly heavy traffic and a side road that also had heavy traffic. The space had long been a barber shop and the current barber was retiring. It was an ideal location. The rent was modest, some of the existing barber's customers would likely come to his new shop since they had been coming there for years, and the location had excellent visibility due to the heavy traffic on both the highway and the side road. He stated: Since I opened the shop ten years ago, I've been very busy cutting hair. In fact, for most of that time, I've really had about all the work I can handle. Even three weeks ago, before the new barbershop opened up a couple of blocks away, I was busy cutting hair about 85% of the time every day. I think the reason I've been so busy over the years is because I work really hard to give very good quality haircuts and I only charge $14, or $13 for anyone 65 or older. …