Financial Analysis: Startup Venture, Budgeting, KPIs & Recommendations

This report provides a comprehensive financial analysis for a startup fashion store, covering key aspects from initial investment sources and risk assessment to detailed budgeting and key performance indicators (KPIs). The business idea centers around offering trendy clothing for men, women, and children in a prime London location. The analysis includes outlining fixed and variable costs, preparing a budgeted profit forecast and cash flow statement for the first year, and calculating the break-even point and margin of safety. Key performance indicators relevant to the fashion industry, such as media features, customer complaints, and rework costs, are discussed, along with recommendations for managing research and development costs and improving customer feedback mechanisms. The report concludes that while the budget is generally sound, focusing on cost management and customer engagement can further enhance the venture's growth and profitability. Desklib offers this and other solved assignments for students.

Business Finance for
Managers

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
1. Summarise the business idea for the start-up of a new venture. Give an analysis of the risks
that the enterprise can face and determine the sources for the initial investment..................3
2. Outline the key fixed and variable costs of the business....................................................4
3. Prepare the budgeted profit forecast for the first year of operation...................................5
4. Prepare the budgeted cash flow for year 1.........................................................................5
5. Calculation of the break – even point and margin of safety...............................................6
6. Discuss the key Performance Indicators for the fashion industry and how it can be
measured.................................................................................................................................6
7. Recommendations based on the results of the above analysis...........................................7
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Business Finance for starting up the new business means that how the funds can be
availed to the proprietor to meet the requirement of commencing the business. A business plan is
a summary which specifies all the details such as vision, mission, objectives, strategies etc.
(Langan and Theriault, 2017). In this report, a business idea for the start of a new fashion store is
opened and the products and services given by the book store. The risk of starting and the initial
investment sources are to be determined. Further, a brief discussion on the fixed and the variable
costs are outlined. Then the budget for the profit and the cash flow is prepared considering all the
expenses which are entailed in opening the new venture. Moreover, the KPIs and the
recommendations were being discussed further and given a brief analysis on the basis of the
budget prepared.
MAIN BODY
1. Summarise the business idea for the start-up of a new venture. Give an analysis of the risks
that the enterprise can face and determine the sources for the initial investment.
A business plan is a written document that explains in detail how a company usually a
starts up its firm. It also defines its objectives and plans to achieve them. From a marketing,
financial, and operational aspect, a business plan lays forth a documented path for the company.
These are crucial papers that are used by both the company's external and internal audiences. A
business plan, for example, is used to attract investment or acquire financing before a company
has established a track record. They're also an excellent way for firms' senior teams to stay on the
same page when it comes to strategic action items and stay on track to meet their objectives.
Business Idea: The plan to is start a new business in the fashion industry. The corporate
organization will also provide customers with trendy clothes to provide them with the best
possible care. There are several products that are provided by the company of men, women and
children These includes such as, t-shirts, trousers, dresses, ethnic wears and customised items of
men, children and women.
Market Research: In the clothing or fashion industry, market research is very crucial.
Because on the everyday basis the trends and the tastes change of the customers (Flori, 2018).

Location: It is situated on the High Street of London from the name of ‘Eternal Threads’.
It is a popular area where people come across to purchase a new variety and ranges of clothes.
Competitors: The competition in the market is very much as so many stores are available
in London for the purchasing of clothes in a wide variety. The main competitor is Marks and
Spenser.
Customers: London is an affluent area with lots of students and faculty, which makes it a
perfect location. People around this location likes to purchase more products rapidly.
Why customer prefer these products and services: The clothing is a need for the people
to wear. Many people are very keen about being updated with their style regarding the clothes
and the essential accessories. So, the customers prefer to but frequently the trending clothes and
brands in the market. The businessmen, women’s, students, youngsters all want to keep them up
to date and go with the trends (Currivan and et. al., 2019).
Financial Risks: There are many stores opened in London. Controlling the financial risk
associated with opening and operating a fashion clothing store will be one of the most important
duties they will have as a business owner. Even after conducting all of the necessary research
and procedures to ensure that sufficient funds have been set aside, there is no way to prepare for
the unexpected; business is plagued by it. Keep track of their expenses and income. Be
economical with their resources and always be aware of their financial situation.
Mismanagement of resources: This topic was a great transition from the one before it.
During this process, companies have the opportunity to underperform not only your funds, but
also everything else they have at their disposal. Those items will be classed as either physical or
intangible assets. To put it another way, tangible assets are generally assets. It covered their
office, any equipment they have, business-related cars, laptops, on-the-go equipment,
consumables, licences, and more.
2. Outline the key fixed and variable costs of the business.
Before setting up the business, the proprietor has to determine the variable and the fixed
costs which will be beared by the company. The machinery of manufacturing the t – shirts is a
major investment.
Fixed Costs: It refers to an expense that doesn't change with an expansion or diminishing
in the quantity of labour and products created or sold. These are the costs that must be paid by an

organization involved in any business activity (Santis, Grossi and Bisogno, 2018). This implies
fixed expenses are for the most part indirect, in that they don't have any significant bearing to an
organization's development of any labour and products. The some of the costs which are rent,
salaries, wages, insurance, maintenance, interest on loan, loan repayments, etc.
Variable Costs: It is a corporate cost that changes in proportion to how much an
organization creates or sells. Its increment or abatement relies upon an organization's creation or
deals volume they ascend as creation increments and fall as creation diminishes (Zhang and et.
al., 2019). Some of the variable expenses include utilities, phones, stationary, promotion &
advertisement, transport etc.
3. Prepare the budgeted profit forecast for the first year of operation.
Budgeted Profit and Loss Statement ( for the first year of operation)
Particulars Amount
Sales 1860000
Less: Cost of Sales 1076100
Gross Profit 783900
Operating Expenses 149560
Salaries 85000
Rent 12000
Staff Wages 35010
Freight & Postage 60
Stationary 20
Promotion & Advertisement 9000
Legal 200
Transport 600
Vehicles 3000
Insurance 250
Maintenance 1500
Loan Repayment 120
Interest on Loan 400
Miscellaneous 2400
Net Profit for the year 698900
4. Prepare the budgeted cash flow for year 1.
Budgeted Cash flow (for year 1)
Particulars
Amoun
t
Cash flow from Operating Activities
Cash Sales 186000

0
Less: Operating Expenses 149560
Salaries 85000
Rent 12000
Staff Wages 35010
Freight & Postage 60
Stationary 20
Promotion & Advertisement 9000
Legal 200
Transport 600
Vehicles 3000
Insurance 250
Maintenance 1500
Loan Repayment 120
Interest on Loan 400
Miscellaneous 2400
Net cash from Operations
171044
0
Cash Flow from Investing Activities
Purchase of Machinery
-
200000
Net cash from investing activities
-
200000
Cash Flow from Financing Activities
Capital Investment
-
400000
Net Cash Flow from Investing Activities
-
400000
Net Cash flow
111044
0
5. Calculation of the break – even point and margin of safety.
Break-even point (in units) = Fixed Cost / (Selling price per unit – Variable Cost per
Unit)
Fixed Cost = 132980
Variable Cost = 16580
Variable Cost per unit = 16580 / 6000 = 2.76
Selling Price Per unit = 300
Break-even point = 132980 / (300 – 2.76) = 447.383 units
Margin of Safety = (Current Sales – Break even sales) / Current Sales *100

= (500 – 447.383) / 500 * 100 = 10.52 %
6. Discuss the key Performance Indicators for the fashion industry and how it can be measured.
Key Performance Indicators (KPIs) refer to a bunch of quantifiable estimations used to
measure an organization's performance for the long – term. It specifically helps in determining
The company's financial, strategic, operations achievements by comparing its performance with
the other firms within the same industry.
These are significant indexes for clients, partners and representatives to comprehend
whether or not an association is on track with its objectives (Baeck, 2018). The fashion industry
ordinarily works through retail outlets and accordingly will have KPIs like that industry just as
performance standards identified with the creativity and acknowledgement of designers for their
items by their clients. It can be measured by the following criteria for the fashion industry:
 Media Features: It identifies with the occasions that magazines, TV projects or Internet
articles refers to a style outlet's item. Many news sources have design features of their
programs listings and utilize these media to acquaint their clients with in trending and
elegant styles. A count of media elements will ordinarily be recorded by the advertising
group working with the design business. It is additionally used to quantify the viability of
the personal relations group.
 Customer Complaints: At the point when purchasers got something wrong against the
agreement with providers as far as item quality they guarantee for the damages. It is
enormous cash to repay to the purchaser. Indeed, even manufacturing plant might lose
business relationship with those purchasers because of helpless item quality. So client
grievance is considered as most significant KPI.
 Rework Cost: Each rework is an expense for the organization. The modification costs
fluctuate as indicated by the interaction and sorts of reworking. It takes additional time
and increment plant overhead. Product and process cost can be followed to measure it.
Lower the Rework cost better is quality execution.
7. Recommendations based on the results of the above analysis.
It can be recommended from the above analysis that the budget prepared by the
management is overall good. But it can more focus on giving more stress on managing the

research and development cost. It can prove helpful for the venture for its development and
growth. The company can hire new designers and can have a feedback book, which every
customer can fill after using their goods and services (Wang and et. al., 2019). It will be useful
for managing the resources and improving the services of the firm. It will assist in increasing the
net earnings.
CONCLUSION
From the above analysis, it can be concluded that financing a business for the starting is the
most impost and crucial part of investment. The investors put their money in a risk for getting the
good returns. Before starting and setting up the new venture, it is essential for the owner to do a
full market research and analysis and then only perform the functions of commencing a business.
Then, a business strategy and budget should be prepared and give an analysis on the net sales,
fixed costs, variable expenses, gross profit and net gains. The budgeted cash flow also plays a
vital role in determining the net cash inflows and outflows from various activities. The break –
even point and margin of safety tell about the profit after selling how many units will be
achieved. Furthermore, the key performance indicators were discussed regarding the fashion and
cloth industry. Moreover, the recommendations based on the above budget and evaluation were
given considering the market tastes and preferences of every customer.

REFERENCES
Books and Journals
Langan, G. and Theriault, B., 2017. Developing a Business Plan for Your Gnotobiotics Program.
In Gnotobiotics. (pp. 335-348). Academic Press.
Flori, G., 2018. Business plan for an Autonomous Driving Formula car in the FSG17
competition.
Currivan, A. and et. al., 2019. A business plan for multidisciplinary consultation liaison team:
Return on investment. General hospital psychiatry. 61. pp.84-85.
Santis, S., Grossi, G. and Bisogno, M., 2018. Public sector consolidated financial statements: a
structured literature review. Journal of Public Budgeting, Accounting & Financial
Management.
Zhang, D. and et. al., 2019. Do financial constraints curb firms’ efforts to control pollution?
Evidence from Chinese manufacturing firms. Journal of cleaner
production. 215.pp.1052-1058.
Baeck, L., 2018. An Expenditure Study of the Congolese Évolués of Leopoldville, Belgian
Congo 1. In Social change in modern Africa. (pp. 159-181). Routledge.
Wang, F. and et. al., 2019. Joint logistics and financial services by a 3PL firm: Effects of risk
preference and demand volatility. Transportation Research Part E: Logistics and
Transportation Review. 130. pp.312-328.