Venture Capital Risk Analysis

This assignment requires students to analyze the risks associated with venture capital investment in a new business, considering factors such as trademark rights, potential losses, delayed returns, and high expected rates of return. Students should use relevant theories and case studies from course materials to support their analysis.

Business plan
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Table of Contents
1. Executive summary............................................................................................................3
2 Business details...................................................................................................................3
3 Key personnel......................................................................................................................4
4 The business idea.................................................................................................................4
5 Business goals.....................................................................................................................5
6 What makes the business different......................................................................................6
7 Market research...................................................................................................................7
8 Profiling customers..............................................................................................................8
9 Profiling competitors (For example SWOT).......................................................................8
10 Managing market risks....................................................................................................10
11 Pricing..............................................................................................................................10
12 Staff.................................................................................................................................11
13 Premises...........................................................................................................................12
14 Profit and loss forecast....................................................................................................12
15 Sourcing finance..............................................................................................................15
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Reference.......................................................................................................................................18
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1. Executive summary
London rags fashion store is new apparel store which provides unique products services to their customers. The focus of the
firm is to target a large number of customers especially women’s. In order to grab the attention of customers company will focus on
advertising products and services. All the legal laws and regulation will be followed which are compiled by the government. One of
the core business strategies is to combine exceptional and knowledgeable customer service with quality stylish merchandise. In current
trends Urban wear has enhanced in popularity, therefore the cited firm will provide a unique product of which are mostly attract the
women’s. Further large marketing budget is known as the key to establishing a well-known fashion brand. London rags fashion
company is start-up company and there are many competitors in the market who sell similar products. The company can focus on
various marketing strategies in order to enhance sales and profits.
2 Business details
Name of the business will be “London rags fashion store. This name is selected to identify the store with the city of London,
England where most of the store ‘inventory will be purchased. It is the upscale women clothing boutique which intends to provide
fashionable products to customers. The business operates within the retail industry with the aim of accomplishing success. The store
will be open near the mall the and it will contain two dressing room. Along with this parking facility will be available in front of the
store with additional spaces (Swamidass, 2016).
One of the primary goals of the firm is to deliver the quality product so that the come back to make the purchase again and again. It
is known as sole proprietor firm which is formally organised in London. All the legal laws and regulation will be followed which are
compiled by the government. The firm is established as a sole proprietorship which makes easier the formation and simplicity of the
tax record keeping and its structure.
The organisation will market women’s clothing which includes semi-casual, professional outfits, casual. Along with this firm will
also sales scarves, belt, and hats as because this all will complement each other to make a complete outfit. The aim of London rags
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fashion store is to develop fashionable, trendy clothing, and accessories with useful younger age people (Burns, Mulle and Bryant,
2016).
3 Key personnel
London rags fashion store is a new company so in management team there will be 4 to 6 members. When the first store will be
established then more shops will be open in town. Main responsibility will be of manager to track sales and profit of the firm. The firm
understands the impact of recruiting and managing staff member will have on the firm success (Zimmerer, Scarborough and Wilson,
2005). Due to this reason, proper time will be taken to overseeing the store and those who are working directly in the store. Employees
which will be hired are as follows:
The sales clerk who will be prevention manager.
The customer service/ inventory control
The customer service/ inventory control manager will be
The store will open seven days a week. It will open in morning 10 A.M to evening 9 PM. On Sunday shop will be open for half day
between 10 A.M to 2 P.M. The company will hire two full-time employees.
4 The business idea
One of the core business strategies is to combine exceptional and knowledgeable customer service with quality stylish
merchandise. Based on the experience of working in retail company help in developing understanding related to the women’s
shopping behavior. London rags fashion store conducted research employed the following marketing strategies.
• To develop a strong relationship with customers through using style assessment and offering services to assist each woman to
determine the clothes according to her requirements.
• To provide educational materials and program for the customer so that they can make effective decisions.
• To build awareness among customers related to the new products which are offered by London rags fashion store.
• To utilise personal referrals and stylish for building traffic.
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Products which will be offered to women’s will be of high quality so that it can easily grab their attention and encourages them for
repeated purchase. There are different sales strategies which can be adopted by the firm. With the intent of establishing a new
business, it is important to create a unique image of themselves (Carrier, Raymond and Eltaief, 2004).. It includes different style prints
and colors. In order to enhance sales and for promoting the firm special events will help which can help people. Some of the specific
events which can be held by the firm are anniversaries, celebrations, contests, fashion shows, festivals, trade shows etc. These all
special events help in boosting the sales and image of the firm. Advertising plays a significant role with respect to increase the profit
of the firm. There are various mediums available for this, but most of them are include social networking sites, Television, magazine.
To have a celebrity in front of campaign help in enhance sale of London rags fashion company (Finch, 2016).
5 Business goals
There are some specific goals of the firms which are as follows
 To create brand image in customer’s mind.
 To enhance sales and profit within a year
 To retain customers through providing unique products.
While establishing a business there are some set of goals which are required to accomplish at the time. In the first year of the
business, the goal is to settle a business with earning a profit. London rags fashion can sell its product at lower price. When the
company will be well established that it can focus expanding its business in next two years. Along with this firm can focus on selling a
wide range of product including men’s wear also (Maxwell, Foley and Marty, 2015). Hence in next two years firm can easily focus on
expanding its business and accomplish success. The peak time of retail business is a month of August till December in this time sales
is high. However, in the month of January, July and June sales remain lower. On the other side in rest of the month's sales remain
lower. Therefore, London rags fashion store can focus on a saturation of special events and sales. Along with this firm also organise
holidays special events for grabbing attention of customers.
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BREAK EVEN ANALYSIS
Amount
(£)
Averagse selling Price 20
Variable Cost 8.09
Contribution 11.91
Total Fixed cost 45000
BEP (in units): Fixed cost /
contribution 3778
6 What makes the business different
The product and services which will be provided by London rags fashion store will be different from its competitors. In
current trends Urban wear has enhanced in popularity, therefore the cited firm will provide a unique product of which are mostly
attract the women’s. Further, the product of London Rags will be more than 32 pieces which will include, leather, denim, linen
bottoms and silk shirts etc. However, fashion trends change constantly and every season there are many fashions shows present
various designer idea. From there also new fashionable clothes idea can be considered for growth and success of the London rags
fashion store. The firm will focus on selling those products mostly which are in current trends. Along with this, frim can focus on
using special events that are fashion shows, festivals to grab the attention of customers and make aware them about new product
development. It helps in making aware of communities policies and goals and purposes (Skoog and Trosdahl, 2017). The top 10
apparel line on which firm can focus are Hocken, Catherine the great, Tosca. James Jeans, Goat, Herr Frau PF lines, Twelfth street,
Philosophy di Alberta Ferretti, Philosophy di Alberta Ferretti, Philosophy di Alberta Ferretti. Hence selling products with unique
concepts play a significant role with respect to enhance sales and profit. There are many competitors in the market who operates their
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business in the retail industry for many years. Along with this they also have capture market shares due to which it is not easy for
London rags fashion company to carry out business and earn a profit. Hence, introducing unique concept will help in making a good
position in the market. Some of the labels which will be carried out by London rags fashion store are as follows:
Wrangler Lawman Jeans
Circle Y of Yoakum Silver Strike Buckles
Sunbody Hats Cowboy Hardware
Hat 'N' Hand 20X by Wrangler
Rouchrider of Circle T Urgent Gear
Western Ethics, Panhandle Slim
Rocky Mountains Cinch
7 Market research
Fashion retail sector is selected for the establishing a new business. This industry is selected because people mostly focus on
their way of living and outfit which they wear, regularly and occasionally. There are some current trends in the fashion industry which
are identified from previous job experience and through conducting research. There are some top trends which help in setting the
agenda for the global fashion industry that is as follows:
Getting personal: Personalisation and curation lead to becoming more essential for the customers. It is because customer values
combine around legitimacy and uniqueness, companies will value data even more to modify recommendation (Zukin, Rath and
Hagemans, 2015).
Platform first: At present customer mostly focuses on online platforms which is the first point of search. It leads to attract their
convenience, relevance and breadth of offering. The platform is growing and reach compelling fashion brands for identifying the way
of engaging more with these effective channels.
Mobile obsessed: A customers with fascination with mobile grows and all the transaction to with mobile. Mobile payment solution is
already available in the market. Further, London rags fashion store is also thinking to cater for enhancing suitable mobile transactions.
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Hence through market research this all are the current trends which are analysed by London rags fashion store (Halkias, 2017).
8 Profiling customers
The company is selling product in fashion retail sector. The main customer group will be firm women’s who are working hard
for the firm. Women’s are more conscious for their way of dressing as compare to man. Therefore, demographic market segmentation
will be focused by London rags fashion store (McKeever, 2016). Further customer research was conducted which help in analysing
the requirements of customers. At present most of the customer focus on purchasing product which are latest in trends and are of good
quality (Kolb, 2015). There are some factors on the basis of which customers make decision where to shop that are as follows
 Treating customers with respect
 Handles merchandise returns fairly
 Makes it quick and easy to shop
 Can find according to their requirement
 Convenient store hours
Per year Per week
Women's Apparel $1100 $29.38
Accessories $636 $13.24
Girls' Apparel $265 $4.08
Babies $219 $5.20
9 Profiling competitors (For example SWOT)
Competitor Strength Weakness
Marks and spencer  Marks and spencer is
considered as one of
the top retail brand
Poor financial performance is
one of the weakness of the
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which have top of the
mind recall.
 It perceives value of
money because of
quality of its product.
firm.
Due to frequent recalls leads
to loss in customer
confidence.
Zara One of the biggest strength of
Zara is lies in its design
abilities. The firm has plethora
of designers on board who
understand who understand
brand of Zara.
One of the weakness is that it
do not advertise its products
and services.
Next Plc Next Plc focus on creating
products which are different
from its competitors. Along
with this it use effective
pricing strategies to sale
products.
One of the weakness lack of
skilled employees due to
which Next plc face problem
After analysing the competitor’s strength and weakness, London rags fashion company can focus on selling products and services with
some unique concept. It can understand factors due to which company profit is getting affected. Such as hiring skilled employees can
help in improving quality of products and increase sales. Due to which it become easy for the firm can easily in
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10 Managing market risks
Starting a new cloth store come-up with the benefits of exposing customers. There are some risks which can be faced by
London rags fashion store that are as follows:
Competitive risk: In clothing business branding is everything. Further large marketing budget is known as the key to establishing a
well-known fashion brand. London rags fashion company is start-up company and there are many competitors in the market who sale
similar products. Therefore, most of the people prefer to visit those retail store which highly advertise their products and services. For
the cited firm not only, the brand awareness can be issues but also large chains have the power to provide deep discounts. It is
essential for the company to advertise products and services in the market so that more and more people came to know about it. To
make a personal connection with customers through loyalty program help to mitigate the risk.
Inventory management: To operate fashion retail store it is important for the owner to keep a regular supply of clothing on hand. If
company fail to purchase enough inventory results in loss of customers and sales. On the other side, if the firm purchase too much
inventory then it incurs losses through selling excess clothes at discount price.
11 Pricing
Pricing strategy play significant role in respect to carry sales products and services. In order to sales products prices need to be set for
each products that are as follows:
Products Price
Leather jacket £ 1000
Jeans £ 1500
Long gown £ 2000
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12 Staff
Roles and responsibility of staff members London rags fashion store can hire skilled employees in order to carry out its business
successfully.
Staff roles
Sales clerk Handle cashier work and loss prevention
Inventory control manager Handle customer services and inventory control
Salesman To advertise products and services
Personnel FY2001 FY2002 FY2003
Staff 1 $6,400 $6,400 $6,400
Staff 2 $6,400 $6,400 $6,400
Other $0 $0 $0
Total Payroll $12800 $12800 $12800
Total Headcount 0 0 0
Payroll Burden $1,800 $1,800 $1,800
Total Payroll Expenditures $14, 600 $14, 600 $14,600
All employees who are hired lead to perform the following roles and responsibility which are mentioned above.
13 Premises
Cost £
Premises required to start-up £1,000
Premises required in the future (if different): £ £1500
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The size of the business required to make sure effectiveness. The minimum cost for the security system which includes shutters,
burglar alarm, locks etc. which is approximately 1,000. Along with this company need to purchase video surveillance that cost is
£1,000. Hence both the security system will be considered under the capital investment and included in the fixed assets which is
reflected in balance sheet. For holding its awareness, it is required to be kept in appropriate working condition
14 Profit and loss forecast
Break even analysis
BREAK EVEN ANALYSIS
Amount
(£)
Averagse selling Price 20
Variable Cost 8.09
Contribution 11.91
Total Fixed cost 45000
BEP (in units): Fixed cost /
contribution 3778
Profit and loss statement
Particulars Year 1 Year 2 Year 3 Year 4 Year 5
sales Revenue
Sales from Products and services 146000 157680 173448 189058 208909
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Less: COGS (30%) 43800 47304 52034.4 56717.5 62672.8
Gross Profit 102200 110376 121414 132341 146237
Operating Expenses
Utilities
(Electricity/water/telephone) 26280 28382.4 31220.6 34030.5 37603.7
Promotion and advertisement 7000 7350 7717.5 8103 8509
Maintenance 12000 12600 13230 13891.5 14586.1
Insurance 800 800 800 800 800
salaries of personnel 25000 27500 30250 33275 36603
Miscellaneous and other Expenses 14600 15768 17344.8 18905.8 20890.9
Depreciation 800 800 800 800 800
Less: total operating expenses 86480 93200.4 101363 109806 119792
Operating Profit 15720 17175.6 20051 22535 26445
Less: Interest 1400 1120 840 560 280
PBT 14320 16055.6 19211 21975 26165
Less: Taxation 2864 3211 3842 4395 5233
Net earnings 11456 12844 15368.5 17580 20932
Budget statement
Year 1 Year 2 Year 3 Year 4 Year 5
cash 107256 153404 206807 267105 336709
Total current assets 107256 153404 206807 267105 336709
fixed assets 50000 49200 48400 47600 46800
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less: Depreciation 800 800 800 800 800
Total fixed assets 49200 48400 47600 46800 46000
total assets 156456 201804 254407 313905 382709
Liabilities
Current liabilities
creditors 18900 51452.8 87317 108394 121264
oustanding and other current
liabilities 8100 22051.2 37422 72262 121264
Total current liabilities 27000 73504 124738 180656 242529
Long term debt 68000 54000 40000 26000 12000
capital 50000 61456 74300 89669 107249
add: NP 11456 12844 15369 17580 20932
Total capital 61456 74300 89669 107249 128181
Total liabilities and capital 156456 201804 254407 313905 382709
Cash flow statement
PARTICULARS
Pre-Operating year
(£) Year 1 (£) Year 2 (£) Year 3 (£) Year 4 (£) Year 5 (£)
Opening Balance 66000 107256 153404 206807 267105
Cash Sales 146000 157680 173448 189058 208909
Owner's capital 55000
Bank Loan 65000
working capital 15000
Total Cash Inflow 135000 212000 264936 326852.48 395866 476014
Cash Outflow
Fixed Assets 50000
Market Research 6000
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Utilities
(Electricity/water/telephone) 26280 28382.4 31221 34030 37604
Legal help and permits 4000
Promotion and advertisement 9000 7000 7350 7717.5 8103.375 8508.54375
Maintenance 12000 12600 13230 13892 14586
Insurance 800 800 800 800 800
Miscellaneous and other Expenses 14600 15768 17344.8 18906 20891
Depreciation 800 800 800 800 800
Interest 1400 1120 840 560 280
Tax 2864 3211 3842 4395 5233
salaries of personnel 25000 27500 30250 33275 36602.5
Loan Repayment 14000 14000 14000 14000 14000
Total Cash Outflow 69000 104744 111532 120045 128761 139305
Closing Balance 66000 107256 153404 206807 267105 336709
15 Sourcing finance
There are various sources from where fund can be collected that can be long term or short term
Retained profit: London rags fashion store can use its retain profit for starting a new business. It can be stated that retained profit is
the investment amount that do not cost anything. The use of retained earning lead to avoid the possibility of change in control. Along
with this avoid any type of interest. Therefore, it can be state that to start-up business retained profit is one of the best sources of
finance.
Medium-term credits are propels for a period of from three to ten years. The rate of premium charged on medium-term bank
advancing to enormous associations will be a set edge, with the measure of the edge dependent upon the credit standing and risk of the
borrower. A progress may have a settled rate of interest or a variable financing cost, so the rate of interest charged will be adjusted
every three, six, nine or a year as per late improvements in the Base Lending Rate.
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Advancing to more diminutive associations will be at an edge over the bank's base rate and at either a variable or settled rate of
premium. Advancing on overdraft is constantly at a variable rate. A credit at a variable rate of interest is all over implied as a floating
rate progress. Longer-term bank advances will a portion of the time be open, as a rule for the purchase of property, where the
acknowledge shows up as a home credit. Exactly when a financial specialist is drawn nearer by a business customer for a progress or
overdraft office, he will consider a couple of components, known ordinarily by the psychological assistant.
Leasing
A lease is an assentation between two get-togethers, the "lessor" and the "inhabitant". The lessor has a capital asset, however
empowers the occupant to use it. The tenant makes portions under the terms of the lease to the lessor, for a foreordained time span.
Leasing is, thusly, a kind of rental. Leased assets have generally been plant and contraption, automobiles and business vehicles,
however may moreover be PCs and office equipment. There are two fundamental kinds of lease: "working leases" and "store leases".
Venture capital
Financing is money put into an undertaking which may all be lost if the endeavor crashes and burns. An authority starting up another
business will contribute speculation of his own, notwithstanding he will in all probability require extra financing from a source other
than his own specific pocket. Regardless, the term 'financing' is more especially associated with putting money, regularly as a final
product of an esteem stake, into another business, an organization buys out or a significant augmentation scheme.
The establishment that puts in the money sees the wager trademark in the financing. There is honest to goodness peril of losing the
entire wander, and it might take a long time before any advantages and returns show up. Nevertheless, there is furthermore the
likelihood of high advantages and a liberal benefit for the wander. A financial specialist will require a high expected rate of benefit for
wanders, to compensate for the high risk.
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Reference
Burns, L.D., Mullet, K.K. and Bryant, N.O., 2016. The business of fashion: Designing, manufacturing, and marketing. Bloomsbury
Publishing USA.
Carrier, C., Raymond, L. and Eltaief, A., 2004. Cyberentrepreneurship: a multiple case study. International Journal of Entrepreneurial
Behavior & Research, 10(5), pp.349-363.
Finch, B., 2016. How to write a business plan. Kogan Page Publishers.
Halkias, D., 2017. Characteristics and Business Profiles of ImmigrantOwned Small Firms: The Case of Albanian Immigrant
Entrepreneurs in Greece.
Kolb, B.M., 2015. Entrepreneurship for the creative and cultural industries. Routledge.
Liana, L., Andraini, F. and Mariana, N., 2016. INCUBATION OF CREATIVE INDUSTRY AND INFORMATION
TECHNOLOGY BUSINESS BASED ON STIKUBANK UNIVERSITY (CASE STUDY OF SBS INCUBATOR STIKUBANK
UNIVERSITY). Proceeding ICOBAME.
Maxwell, E., Foley, M., Braman, J., Sopeth, J. and Marty, R., 2015. Rosemount Eco-Green Business Park Feasibility Study.
McKeever, M., 2016. How to write a business plan. Nolo.
Skoog, C. and Trosdahl, K., 2017. Strategic Business Plan for Christine's Sweet Confections (Doctoral dissertation, The College of
St. Scholastica).
Swamidass, P., 2016. Engineering Entrepreneurship from Idea to Business Plan: A Guide for Innovative Engineers and Scientists.
Cambridge University Press.
Zimmerer, T.W., Scarborough, N.M. and Wilson, D., 2005. Essentials of entrepreneurship and small business management. Upper
Saddle River, NJ: Pearson/Prentice Hall.
Zukin, S., Rath, J., Hendriks, A. and Hagemans, I., 2015. From greengrocers to cafes: Producing social diversity in Amsterdam.
In Global cities, local streets (pp. 90-119). Routledge.
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