Fictional case: Cedar Home Services
Map a home-service business and compare two ways to support its growth.
Use a small owner-operated service company's facts to draw its business model and identify the constraint most likely to limit growth.
Overview
Cedar Home Services has more interested customers than it can currently serve. Its owner, Elena, has $800 available for a growth experiment after reserving cash for existing obligations. She is considering advertising or part-time scheduling help.
Cedar and all figures are fictional teaching assumptions.
Recall Lesson 004: Ridgeway could assemble 150 crates but pack only 100 each week. Which capacity determined shipments?
The business
Cedar serves homeowners in three nearby neighborhoods who want small maintenance jobs completed without coordinating several tradespeople. Customers currently do the work themselves, postpone it, or hire separate providers.
Cedar sells a defined maintenance visit for $200. It covers two hours of agreed minor repairs and preventive tasks. Specialized work and major repairs are excluded. Customers approve the task list before booking and pay on Friday after their completed visit. Assume every payment arrives as agreed.
Customers find Cedar through neighborhood referrals and local search listings. Repeat customers say they value reliable arrival windows, familiar technicians, and a record of completed work.
Elena qualifies requests, confirms the task list, schedules visits, and checks completion. Two part-time technicians perform the work. Cedar uses a shared calendar, tools, a vehicle, and a local supplier for consumables. Elena can change spending and service commitments; technicians control how they perform the agreed tasks within Cedar's standards.
Demand and capacity
For each of the next four weeks, 24 customers are ready to book at the stated price. They will use another provider if Cedar cannot confirm a visit that week.
| Activity | Weekly capacity |
|---|---|
| Qualifying and scheduling visits | 16 visits with Elena's current administrative time |
| Technician work, including travel | 60 available hours; each visit requires 3 hours |
| Tools, vehicle, and supplies | Enough for at least 24 visits |
Every visit requires scheduling and field delivery. Cedar completes 16 weekly, with no unfinished work carried forward.
Capacity is the amount a resource can handle in a stated period. A constraint is what currently limits the result you want. Operations planning connects resources and schedules to delivery and customer satisfaction. Source: OpenStax.
Costs and choices
Each completed visit costs $90 for technician labor, including travel and all employer costs, plus $20 for supplies and payment processing. Technicians are paid only for completed visits in this simplified case. Other weekly expenses total $900, including Elena's pay. Those expenses remain unchanged under either option. Ignore income taxes and equipment purchases.
Revenue per visit less costs that change with each visit is $200 − $90 − $20 = $90. This amount is available to cover the other expenses and profit. It is not the profit from the whole business.
| Option | Cost and effect for one week |
|---|---|
| A: Buy advertising | Pay $400. Assume it adds 8 confirmed requests, with no change to scheduling or technician capacity. |
| B: Add a coordinator | Pay $300. A trained coordinator raises qualifying and scheduling capacity to 24 visits. Technician capacity stays unchanged. |
Both options can start next week. The coordinator needs no training and accepts a one-week trial without further commitment. Elena approves the trial and remains responsible for customer promises.
For the cash calculation, the $800 is available after all payments for the existing 16 visits and other obligations have been reserved. Advertising, coordinator pay, and the costs of additional visits must be paid by Thursday. Payment for additional completed visits arrives Friday. There are no other additional cash movements.
Exercise
Allow 8–10 minutes. Use a calculator if helpful.
- Write a five-line business map covering the customer and benefit, offering and payment, sales channels, delivery resources, and reason customers return.
- Calculate technician capacity. Identify today's main constraint and how many additional visits each option permits.
- Calculate weekly revenue and profit with no change, with advertising, and with a coordinator. Use profit = revenue − visit costs − other weekly expenses − the selected option's cost.
- For the coordinator option, calculate cash required before Friday and cash remaining from the $800 before and after Friday's collections.
- Recommend one option. State what limits further growth afterward, one assumption to verify, and one customer outcome to monitor.
Your notes form this week's business model and value-flow map; no extra assignment is needed.
Answer
A concise business map would describe nearby homeowners seeking convenient, dependable maintenance; a $200 defined visit paid after completion; referrals and local search; Elena, technicians, a calendar, tools, transport, and a supplier; and repeat purchases based on reliability and familiarity.
The work flows from customer request to agreed tasks, scheduling, field delivery, completion check, and payment. Money arrives after Cedar has paid for the additional work. That timing creates a funding need even when the work improves profit.
Technician capacity is 60 hours ÷ 3 hours per visit = 20 visits weekly. Elena can schedule only 16, so scheduling currently limits completed visits. Buying advertising raises requests from 24 to 32, but completed visits remain 16.
The coordinator raises scheduling capacity to 24. Technicians can still deliver only 20, so Cedar completes four additional visits. Field delivery becomes the next constraint.
| Weekly amount | No change | Advertising | Coordinator |
|---|---|---|---|
| Completed visits | 16 | 16 | 20 |
| Revenue at $200 per visit | $3,200 | $3,200 | $4,000 |
| Visit costs at $110 each | $1,760 | $1,760 | $2,200 |
| Other expenses | $900 | $900 | $900 |
| Option cost | $0 | $400 | $300 |
| Profit | $540 | $140 | $600 |
With a coordinator, revenue is 20 × $200 = $4,000 and visit costs are 20 × $110 = $2,200. Profit is $4,000 − $2,200 − $900 − $300 = $600, an improvement of $60 over the current $540.
Before Friday, expansion requires (4 × $110) + $300 = $740. Available cash falls to $800 − $740 = $60. Friday's additional collections are 4 × $200 = $800, bringing this available cash to $860. This tracks only the expansion funds; the case does not supply Cedar's total bank balance.
Choose a one-week coordinator trial. It addresses the constraint within the cash limit. Advertising cannot increase completed visits here.
The cushion is narrow. At only three additional visits, the profit change would be (3 × $90) − $300 = −$30. Confirm the coordinator's capability and enough customer bookings before committing. Twenty visits also consume all planned technician hours, leaving no allowance for overruns.
Track visits completed within the promised window, along with actual hours and cash collections. Consult technicians about travel estimates and workload. Further growth requires more effective field capacity or less time per visit while preserving quality.
Recall answer: Packing's 100-crate capacity limited Ridgeway's shipments. Cedar illustrates how the limiting activity can change after an improvement.
Applying this lesson
Connect each purchase to the work, resources, costs, and payment dates needed to deliver it. Identify the limiting activity and test a small change.
Next: Cumulative review: Value, money, and business systems. You will reconstruct a business model and work through a fresh revenue, profit, and cash example.
Sources
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