Two partners own together a small landscaping business in North Carolina, called

Question

Two partners own together a small landscaping business in North Carolina, called Summer Lawn Care. They have been specializing in summer grass seeding, installation, and maintenance. Recently, the partners acquired special technology and know-how for winter grass installations and maintenance. They also added a tree cutting service as recent storms in the area had caused demand for this service to soar. One of the partners insists that the name of the business should change to Lawn and Tree Care, so that it better reflects the range of services and, thus, generates more customer interest, and thus contracts. The second partner wants to keep the old name and argues, "We have already paid for business cards, vehicle paint, signage, and ads in Yellow Pages". Evaluate the arguments of the two partners. For full points please explain and illustrate their points by identifying the relevant and irrelevant costs for this decision.

Explanation / Answer

The irrelevant costs would in any other case would have been all the ones mentioned such as business cards, vehicle paint, signage, and ads in Yellow Pages. But these become relevant in the issue that is raised here as whether these costs are sunk, will depend upon the deciosion taken. Now both the partners are correct in their own ways. On one hand since the new technologies have been adopted and tree cutting services have been incorporated, it makes sense to have a name that reflects such offerings. So Lawn and Tree Care makes sense. On the other hand, a hefty sum may have been paid for the expenses mentioned above.

Now i would say depending upon the size of the business the decision should be taken.

If the business is a small one, even after expansion, so that the costs incurred on the above expenses form a major chunk of the capital, then it is better to wait for a while till the business grows and then go for a chance of name. The business can still reflect the new services and offerings as we know many businesses today whose name do not reflect all the products and services offered by them.

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