| Category | Assignment | Subject | Management |
|---|---|---|---|
| University | Singapore University of Social Science | Module Title | BUS357 Starting and Managing a Business |
Answer all questions in this section.
The ‘upcycling movement’ is gaining momentum globally. In upcycling, businesses or individuals creatively reuse existing garments or materials to create new pieces. Old, discarded materials and products are transformed into new items of higher value without first being processed into basic materials or degraded, as is the case with recycling. The term ‘upcycling movement’ therefore refers to the overall trend and the growing social and environmental movement focused on reusing materials and creatively transforming discarded items into valuable products.
A recent article from Harvard Business Review (Caprioli et al., 2024) highlighted that upcycled products resonate with consumers not only for their eco-friendly credentials but also because they showcase ingenuity and originality. Companies can capitalise on this by focusing on the unexpected uses of materials, promoting creative narratives, and fostering innovation through cross-industry partnerships.
Latching onto this trend and potential business opportunity, you and a trusted friend decided to start a new venture to sell upcycled bags and related accessories. In fact, a survey from YouGov (Tan, 2024) revealed that Singaporean consumers cited availability as the main reason for not purchasing more sustainable fashion.
Your business will source upcycled handbags from a community thrift shop run by individuals with disabilities. These individuals skillfully clean and repurpose pre-loved handbags and accessories, giving them a renewed purpose and a “second life.” You have negotiated an agreement to acquire the upcycled inventory at 40% of the retail price, which typically falls between $150 and $250 per item.
The business will operate from a small retail space in Queensway Shopping Centre, with a small storage area allocated for inventory. Your partners are also open to using online e-commerce platforms as alternative channels to market and sell the products. You will assume the role of general manager and handle the marketing functions, and your business partner will take charge of purchasing, inventory management, and retail operations.
Feeling excited and invigorated about the prospects of this venture, you pulled together an initial capital of $60,000 and registered for a business entity with ACRA. Certainly, this initial capital is insufficient, but you have been introduced to a businessman who believes in your business and is willing to provide additional capital and a personal loan to ensure the success of this business in exchange for equity.
Required:
You are to construct a business model canvas to analyse the opportunity for launching a retail shop selling upcycled bags and accessories.
In your report, you should appraise in detail each component of the business model canvas.
The report should also include a detailed 3-year financial analysis to demonstrate the financial viability of the venture to the investor and to justify the need for funding through equity and loan.
References:
Caprioli, S, Fuchs, C., & Van den Bergh, B. (2024, April 24). Research: Why People Really Buy Upcycled Products. Harvard Business Review. https://hbr.org/2024/04/research-why-people-really-buy-upcycled-products.
Tan, S. (2024, January 29). Sustainable fashion in Singapore: Who’s bought environmentally friendly clothes & why others haven’t. YouGov. https://business.yougov.com/content/48480-sustainable-fashion-in-singapore-who-buy-environmentally-friendly-clothes-why-others-havent.
Guidelines and Assumptions
1. The primary revenue-generating activity of the proposed business must be for a retail establishment selling upcycled bags and accessories. Operating as a franchised unit is not allowed.
2. The proposed location for the retail shop will be at Queensway Shopping Centre, 1 Queensway, Singapore 149053 (https://maps.app.goo.gl/3V56T7Dtpmhce1AYA). There is a small unit of 450 square feet available on Level 2, with a monthly rental cost of $16 per square foot. The shop is unfurnished and in ready-to-move-in condition. There is a minimum lease period of three (3) years.
3. The rental deposit required is equivalent to two (2) months’ rental, to be paid together with the first month’s rental upon commencement of the lease. Sub-letting is not allowed.
4. The first two (2) months of operations is the gestation period of the new business, e.g., manufacturing, inventory management, staff recruitment, renovation, staff training, etc. The first revenue can only be received by the new business from the third month onwards.
5. The depreciation for any capital expenditure is calculated using the straight-line method over three (3) years.
6. You will invest $60,000 of the Total Investment Required (TIR) as your Equity Capital, with the balance of the TIR to be funded by the potential investor in a combination of equity capital and interest-bearing personal loan. The investor stated that he is only willing to invest between 40% to 60% of the Balance of the TIR as his Equity Capital. Therefore, you will need to propose the amount and subsequently determine the corresponding shareholding to be offered to the investor. The remaining shortfall in the Balance of the TIR will be provided as a loan from the investor to the business at the start, with only interest payable each month (see further for Cost of Debt), and the full repayment of the principal due in the 36th month. The business will not apply for bank loans during the first 3 years.
7. The following Cost of Capital (Weighted Average Cost of Capital, WACC) formula must be used (no marks will be awarded if any other WACC formula is used):
WACC = (E/V) × Re + (D/V) × Rd × (1 – Tc)
8. Specific Tax Exemptions, Credits and Reliefs (e.g., Tax Exemption Scheme for New Start-Up Companies), Concessions, Rebates, Loss-Carrying Forward and similar Schemes are to be ignored in computations.
9. The financial statements, together with the key major assumptions made (e.g., basis for sales forecast, budget for major cost items, etc.), must be included in the main report. Other information and supporting evidence can be placed in the Appendix.
10. The financial statements must be inserted and properly resized as an embedded object clearly displayed in MS Word (use “INSERT > OBJECT” function) and NOT as a picture, image, link to an external document, or as an attachment. The embedded Excel object must show the monthly figures with a total for the year. In addition, the same Excel file with the financial statements and assumptions should be attached as a ‘clickable Excel icon’ in the main report.
11. The report should be formatted with 2.54cm (1-inch) margin on all sides, typed in Times New Roman 12-points with 1.5 line spacing for the paragraphs. All graphs, tables and images must be numbered and titled.
12. You must follow the report format provided below with answers for each section clearly demarcated by its respective sub-header numbering and title.
13. In addition to the course materials provided, you are free to conduct library research, field research, interviews, etc.
14. Any assumptions made must be supported by appropriate references shown in the appendices. All sources must be properly cited in the text and included in the reference list.
15. The main report, including the Executive Summary, must not exceed 3,000 words – excluding the cover page, Table of Contents, Appendices and reference list. Marks will be deducted for excessive length.
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Practise making a pitch presentation by preparing a video recording of the presentation of at least 3 minutes but not exceeding 5 minutes. Refer to Canvas T/TG/RESIT course site > Assignments > ECA_VIDEO for the step-by-step guide on how to submit the video.
Answer all questions in this section.
Prepare a set of PowerPoint presentation slides upon which the video presentation is based. Please note that the PowerPoint must be converted to PDF before submission to Canvas.
ECA Report Format
[Name of Company]
[Date]
Table of Contents
1. Executive Summary (Maximum 600 words)
(Indicate word count)
2. The Business Model
3. Financial Analysis
4. Investment Proposal
1. Total Investment Required, Proportion & Justification for Equity-Debt Ratio required from Investor
2. Expected Financial Returns:
*correct to 2 decimal places
You must use the following rates in your calculations:
You are required to show the workings for the calculations above.
3. Conclusion: Percentage Shareholding Offered to Investor
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