Color Thread: New Venture Creation Report - Analysis and Strategy

This report analyzes the creation of a new clothing retail venture, Color Thread, focusing on key aspects of entrepreneurship, creativity, and innovation. It explores how these principles translate into new processes, products, and services. The report emphasizes the importance of understanding customer needs, wants, and behaviors to identify value propositions for target segments. Furthermore, it includes financial forecasts such as income statements, break-even analysis, cash flow statements, and balance sheets to evaluate the financial performance of the venture. The analysis extends to assessing the degree of competition within the market and its potential impact on profitability. The report concludes by evaluating the planning framework and key activities involved in launching a new venture, offering valuable insights into the strategic considerations for Color Thread's success.

New Venture Creation

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
LO1
Exhibit how the principles of creativity, innovation and entrepreneurship convert into new
processes, products and services......................................................................................................1
LO2
Display awareness of the requirement to understand the needs, wants and behaviour of various
types of potential customers in the marketplace and identify deliver value proposition to target
customer segments..........................................................................................................................4
LO3
Draw the financial forecasts for a new venture- income statement, breakeven, cash flow
statement, balance sheet and evaluate these forecasts of financial performance............................5
LO4
Evaluate the degree of competition in a market and the likely effect on the profitability ............6
LO5
Evaluate the degree of competition in a market and the likely effect on the profitability ............6
CONCLUSION................................................................................................................................7
Refrences………………………………………………………………………………………….8
Books and Journals.....................................................................................................................8

INTRODUCTION
New venture creation means to develop a new business when some new idea and technology
comes up. The person who builds the new business is the entrepreneur who undertakes the
responsibility of starting a new business with some goals and objectives for which the business is
set up (Roman, Bilan and Ciumaș, 2018). Starting the own business is not simple as the owner
has to look on many factors before starting the business which includes target market, target
consumers, competition, risk of new entrants and many more. Color Thread is the clothing
retailer which is a new start up in UK. The company produces different ranges of clothes starting
form men’s wear to women and also for children’s. With the quality in their clothing material
and their unique styles in accordance with the modern fashion they want to develop their brand
not just in one country but internationally. This report will cover that how the principles of
creativity, innovation and entrepreneurship will convert it new processes, products or services. It
also includes the importance of requirements of customer needs, wants and behaviour of the
various types of potential customers in the market place and to identify the value proposition to
target customer segments. In addition with this the report will cover all the financial forecasts for
the new venture and the degree of competition in the market place. Applying the concepts for
developing a planning framework and evaluating the key activities involved in starting a new
venture.
MAIN BODY
LO1 Exhibit how the principles of creativity, innovation and entrepreneurship convert into new
processes, products and services
For developing any product or services in the company it requires some new and
innovative idea and proper research within which the company can built its product (Neumeyer
and Santos, 2018). However the principles are the guidelines which provide the roadmap to the
businesses and the owners that how they have to produce the product.
 Creativity- Creativity means to make something new and productive into reality. It is way
of thinking that helps people to solve all the challenges and come up with creative
solution. Color Thread has used various creative ideas in the business which will help
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them to be different and unique form others. Some principles of creativity are mentioned
below-
 Perceptive- Creativity is perceptive in the sense that it requires a perception of the
individual to see the things (Cao and Shi, 2020). Perception leads to change in mind and
thoughts for looking everything. The team of color thread have researched the new ideas
which other companies have adopted and from that they bring out new idea serving in
different way.
 Courageous- Courage means not to fear in anything and do what your heart and mind
want to do. The creative person can come up with any idea which might not be profitable
for the company sometimes. But how to fulfil the creative idea in the business is what
makes them courageous. Color Thread have some clothes which not be acceptable by
some people but the company have strong feeling that many youth would love to
purchase such.
 Constructive- Any creative person requires constructive mind for building new creation.
The constructive mind brings new imagination and productive thoughts which helps the
business to bring new changes. Color thread has come up with unique ranges of products
which are not yet being offered by any clothing company.
Creative ideas and approach helps the company to develop new ideas for the different ranges of
the products. Ideas could also be to develop cost effective process for developing any product.
Using constructive and perceptive approach the company can bring new clothes in the market
making it different from others.
Innovation- Innovation means to come up with different ideas and features for the existing or
some new product (Muscio and Ramaciotti, 2019). Demand for some new and differ products
have been increased in the market by which companies tries to come up with some new features.
Some principles of innovation is explained below-
 Inspire- Innovation starts in the startup when the leader inspires other to bring new
innovations and changes in the business activities and products. It requires a vision of the
person who can the innovation and motivates the other. The leaders in the Color Thread
Company motivates the employees to come up with new ideas which they can evolve in
their clothing range.
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 Curiosity- For bringing innovation the person needs to be curious about different areas
in the environment and have to think how they could develop it into new meaning.
Curiosity in seeing everything has resulted in good and different changes within the
business.
 Intuition- It is the other factor which contains that strong gut feeling of the individual
for conducting any task (Gu, Qian and Lu, 2018). The intuition are the inner feeling
which are not always wrong but people generally forgets it. The management team of the
Color Thread have encouraged their employees to come with the idea for which they
have strong intuition that it would be profitable.
It is important for the entrepreneurs to bring new and innovative ideas ain their business as
this will not only build their business success but will be different in the market. In today’s world
it is very essential for the companies to be innovative in their products to bring growth and attain
longevity in the business. Color Thread have used different and innovative ideas for bringing
new ranges of clothes to their consumers.
Entrepreneurship- Entrepreneurship means the development of a new business with some
different idea for conducting the enterprise. For managing a new venture the entrepreneurs have
to work hard for bringing its growth and new opportunities. Some principles of entrepreneurship
are mentioned below-
 Be a solution provider- It is important for the entrepreneurs to face the risks and provide
the solutions for solving such risks. The entrepreneur of Color Thread is provides the
solutions and new ideas if the company will face some challenges.
 Vision- To set goals is the prior wok for establishing a new business (Nzembayie,
Buckley and Cooney, 2019). But besides this clear vision of what company want to
achieve must be there in the mind of an entrepreneurs. Color Thread have the clear aims
and goals about what they have to do and how they have to function to work globally.
 Viable products- The entrepreneur is the main head who decide what products must be
there in the business. The team of the company provide the idea about the different
products which they can serve. The main role of the entrepreneur is to decide which
products will be viable and good for the company that can earn higher profits.
Having key features in the entrepreneurs is very important as they are the ones who give
permission to which products and services they have to work on. For this the entrepreneurs need
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to be distinct, approachable and having knowledge about the market as well as the demands of
the consumers.
LO2 Display awareness of the requirement to understand the needs, wants and behaviour of
various types of potential customers in the marketplace and identify deliver value proposition to
target customer segments
A company which produces the products for consumers must be aware of the requirement
about what they want and should identify their needs (Rocha and Van Praag, 2020). Color
Thread have worked on this factor and have identified these three things which are explained
below-
Needs- Needs of the customers means the product which they require in their daily life or they
have the requirement of a particular product. Color Thread have conducted various things to
identify the customer needs so that they can become aware of all the different needs which they
want-
 Product needs- Consumers require product because they want it and require to function
properly. Companies have to make sure by taking feedbacks form the consumers about
which type and what they require (Kim, ElTarabishy and Bae, 2018). Because if
consumers are given those product which have no importance in their life then it would
be wasteful for the company. Color Thread have worked on this factor to identify the
varieties and types of clothes which every age group person require in their life.
 Pricing- It is not important that the budgets of every group of people are high that means
that they have the highest budget for purchasing any product. The companies have to
build such products which are purchased and used by every person irrespective of the
price. Color Thread has kept this thing in mind and developed the clothes in every range
which the low, medium and high group person can purchase.
Wants- The wants and desires of the consumers are the emotions which every consumer have
from the company as well as with the product.
 Listen to customers- Companies would be able to identify the desire of the consumers
only when they will listen to them. They can conduct questionnaires and can send them
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the mails about their requirement. Color Thread have come up with different types of
clothes which were earlier not sold by the businesses.
 Usability- Consumers will purchase the product only when they have some use and will
be beneficial for them (Neneh, 2019). There are only less than 10% people who purchase
product without any use other purchases because of the importance in their lives. The
company have brought the clothes not only for women but also for men and children
satisfying the needs by providing different products at a reasonable price. As by
purchasing the clothes no consumer will feel that they have done the purchasing which is
wasteful.
Behaviour- Behaviour of the consumers means what are their thoughts and thinking for
purchasing any product. These are the factors which are present before making any purchases.
 Awareness- Consumer behaviour for the product will be very quick if they are aware
about the products in the market and the company which is launching it. Color Thread
have marketwise the brand in the market very perfectly so that it reaches to every
consumer.
 Preference- Sometimes it is the preference also which changes the behaviour of the
consumer which changes the preference of purchasing the product. It might be that the
product must not be totally worth and some are the products which are totally worthful,
but it depends on what they prefer.
Hence, these are the factors which every company must be aware of before launching the
new startup and its business. Getting all the information about the consumers helps them to
become aware so that they can fulfil the needs of them.
Deliver value proposition- It is the value which the company has to serve to its customers which
they promises to them (Futterer, Schmidt and Heidenreich, 2018). The company has to give them
any reason which provokes tem to buy form the same company. Different deliver value
propositions for the customers of Color Thread-
 Product is unique- The Company have to make sure that whatever they are providing to
their consumers is different from other. The designs which they are offering are unique.
 Prices are the lowest- Color Thread have successfully implemented in making the
products at a much reasonable price than what others are offering. The prices which the
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consumers are paying for the same design and clothes are the same which they are
providing them in reasonable price.
LO3 Draw the financial forecasts for a new venture- income statement, breakeven, cash flow
statement, balance sheet and evaluate these forecasts of financial performance
The below mention are the financial statement for new business including the start-up
cost and other useful documents with projected figures:
START-UP COSTS AND THE FUNDS REQUIRED
ESTIMATED MONTHLY EXPENSES
Column 1 Column 2 Column 3
0 Number of Months Estimated
Cash
Item Monthly Expenses of Cash Required Required to
Start
Based on Sales to Cover Expenses Business
(Column 1
x2)
Salary of Owner-Manager $5,000 1 $5,000
All Other Salaries and
Wages $12,000 1 $12,000
Rent $4,500 1 $4,500
Advertising $2,200 1 $2,200
Delivery Expense
(Transportation) $1,800 1 $1,800
Supplies $1,600 1 $1,600
Telephone, Fax, Internet
Service $250 1 $250
Other Utilities $450 1 $450
Insurance $150 1 $150
Taxes Including
Employment Insurance $300 1 $300
Interest $600 1 $600
Maintenance $200 1 $200
Legal and Other
Professional Fees $800 1 $800
Miscellaneous $750 1 $750
Total Cash Requirements for Monthly Recurring Expenses: (A) $30,600
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START-UP COSTS that is
needed to PAY ONLY
ONCE:
Cash
Require
d to
Start
Business
Capital Costs:
Fixtures and Equipment $18,000
Decorating and
Remodelling $6,000
Installation of Fixtures and
Equipment $4,500
Starting Inventory $12,000
Soft Costs:
Deposits with Utilities $3,500
Legal and Other
Professional Fees $1,000
Licences and Permits $2,000
Advertising and Promotion
for Opening $1,000
Accounts Payable $2,200
Cash $3,500
Miscellaneous $1,200
Total One-Time Cash
Requirements: (B) $54,900
TOTAL ESTIMATED
CASH REQUIRED TO
START BUSINESS: (A) +
(B)
85,500
Cash flow projection for first 5 years
Cash Flow from
Operations Year 1 Year 2 Year 3 Year 4 Year 5
1. Cash Sales * $20,000.00 $22,000.00 $24,200.00 $26,620.00 $29,282.00
2. Payments for
Credit Sales ** $12,000.00 $13,200.00 $14,520.00 $15,972.00 $17,569.20
3. Investment
Income $5,000.00 $5,500.00 $6,050.00 $6,655.00 $7,320.50
4. Other Cash
Income $2,500.00 $2,750.00 $3,025.00 $3,327.50 $3,660.25
A. TOTAL CASH
ON HAND $39,500.00 $43,450.00 $47,795.00 $52,574.50 $57,831.95
7

Less Expenses Paid
(during month)
5. Inventory or
New Material $15,000.00 $16,500.00 $18,150.00 $19,965.00 $21,961.50
6. Owners’ Salaries $12,000.00 $13,200.00 $14,520.00 $15,972.00 $17,569.20
7. Employees’
Wages and Salaries $15,000.00 $16,500.00 $18,150.00 $19,965.00 $21,961.50
8. Supplies and
Postage $3,000.00 $3,300.00 $3,630.00 $3,993.00 $4,392.30
9. Advertising and
Promotion $2,500.00 $2,750.00 $3,025.00 $3,327.50 $3,660.25
10. Delivery
Expense $1,500.00 $1,650.00 $1,815.00 $1,996.50 $2,196.15
11. Travel $2,000.00 $2,200.00 $2,420.00 $2,662.00 $2,928.20
12. Legal and
Accounting Fees $1,000.00 $1,100.00 $1,210.00 $1,331.00 $1,464.10
13. Vehicle
Expense $0.00 $0.00 $0.00 $0.00
14. Maintenance
Expense $700.00 $770.00 $847.00 $931.70 $1,024.87
15. Rent $5,500.00 $6,050.00 $6,655.00 $7,320.50 $8,052.55
16. Utilities $800.00 $880.00 $968.00 $1,064.80 $1,171.28
17. Telephone -$400.00 -$440.00 -$484.00 -$532.40 -$585.64
18. Taxes and
Licences -$500.00 -$550.00 -$605.00 -$665.50 -$732.05
19. Interest
Payments -$900.00 -$990.00 -$1,089.00 -$1,197.90 -$1,317.69
20. Insurance -$300.00 -$330.00 -$363.00 -$399.30 -$439.23
21. Other Cash
Expenses -$800.00 -$880.00 -$968.00 -$1,064.80 -$1,171.28
B. TOTAL
EXPENDITURES $56,100.00 $61,710.00 $67,881.00 $74,669.10 $82,136.01
Capital
Purchase of Fixed
Assets
-
$21,000.00 -$23,100.00 -$25,410.00 -$27,951.00 -$30,746.10
Sale of Fixed
Assets
C. CHANGE IN
CASH FROM
PURCHASE OR
SALE OF ASSETS
-
$21,000.00 -$23,100.00 -$25,410.00 -$27,951.00 -$30,746.10
Financing
Payment of
Principal of Loan -$1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00
Inflow of Cash
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from Bank Loan
Issuance of Equity
Positions
Repurchase of
Outstanding Equity
D. CHANGE IN
CASH FROM
FINANCING
-$1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00
E. INCREASE
(DECREASE) IN
CASH (E = A – B ±
C ± D)
$73,600.00 $83,060.00 $91,266.00 $100,292.60 $110,221.86
F. CASH AT
BEGINNING OF
PERIOD
$5,000.00 $78,600.00 $161,660.00 $252,926.00 $353,218.60
G. CASH AT END
OF PERIOD (G = F
± E)
$78,600.00 $161,660.00 $252,926.00 $353,218.60 $463,440.46
MEET MINIMUM
CASH BALANCE
Income statement for first 5 year of new venture
Particulars Year 1 Year 2 Year 3 Year 4 Year 5
1. Gross Sales $80,000.0
0
$88,000.0
0
$96,800.0
0
$106,480.0
0
$117,128.0
0
Products $35,000 $38,500 $42,350 $46,585 $51,244
Services $45,000.0
0
$49,500.0
0
$54,450.0
0 $59,895.00 $65,884.50
2. Less: Cash Discounts
A. NET SALES $80,000 $88,000 $96,800 $106,480 $117,128
Cost of Goods Sold:
3. Beginning Inventory $0
4. Plus: Net Purchases $15,000 $16,500 $18,150 $19,965 $21,962
5. Total Available for Sale
6. Less: Ending Inventory $0
B. COST OF GOODS SOLD $15,000 $16,500 $18,150 $19,965 $21,962
C. GROSS MARGIN $65,000 $71,500 $78,650 $86,515 $95,167
Less: Variable Expenses*
7. Owner’s Salary $12,000.0
0
$13,200.0
0
$14,520.0
0 $15,972.00 $17,569.20
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8. Employees’ Wages and
Salaries
$15,000.0
0
$16,500.0
0
$18,150.0
0 $19,965.00 $21,961.50
9. Supplies and Postage $3,000.00 $3,300.00 $3,630.00 $3,993.00 $4,392.30
10. Advertising and
Promotion $2,500.00 $2,750.00 $3,025.00 $3,327.50 $3,660.25
11. Delivery Expense $1,500 $1,650.00 $1,815.00 $1,996.50 $2,196.15
12. Bad Debt Expense -$4,000 -
$4,400.00
-
$4,840.00 -$5,324.00 -$5,856.40
13. Travel $2,000 $2,200.00 $2,420.00 $2,662.00 $2,928.20
14. Legal and Accounting
Fees $1,000.00 $1,100.00 $1,210.00 $1,331.00 $1,464.10
15. Vehicle Expense $0 $0.00 $0.00 $0.00 $0.00
16. Miscellaneous Expenses -$800.00 -$880.00 -$968.00 -$1,064.80 -$1,171.28
D. TOTAL VARIABLE
EXPENSES $32,200 $35,420 $38,962 $42,858 $47,144
Less: Fixed Expenses*
17. Rent $5,500.00 -
$5,000.00
-
$5,000.00 -$5,000.00 -$5,000.00
18. Repairs & Maintenance $700.00 -$400.00 -$400.00 -$400.00 -$400.00
19. Utilities (Heat, Light,
Power) $800.00 -$600.00 -$600.00 -$600.00 -$600.00
20. Telephone -$400.00 -$400.00 -$400.00 -$400.00 -$400.00
21. Taxes and Licences -$500.00 -$500.00 -$500.00 -$500.00 -$500.00
22. Depreciation -$2,000 -$2,000 -$2,000 -$2,000 -$2,000
23. Interest -$900.00 -$900.00 -$900.00 -$900.00 -$900.00
24. Insurance -$300 -$300 -$300 -$300 -$300
25. Other Fixed Expenses -$1,500 -$1,500 -$1,500 -$1,500 -$1,500
E. TOTAL FIXED
EXPENSES $1,400 -$11,600 -$11,600 -$11,600 -$11,600
F. TOTAL OPERATING
EXPENSES $32,200 $35,420 $38,962 $42,858 $47,144
G. NET OPERATING
PROFIT (LOSS) $97,200 $106,920 $117,612 $129,373 $142,311
H. INCOME TAXES
(estimated) -$2,000 -$2,200 -$2,420 -$2,662 -$2,928
I. NET PROFIT (LOSS)
AFTER INCOME TAX $95,200 $104,720 $115,192 $126,711 $139,382
Balance sheet
ASSETS
Current Assets:
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