Financial Entrepreneurship
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Financial Entrepreneurship
Inside Rosita’s Closet is a fashionable plus size women’s clothing boutique that will open in mid-year. Inside Rosita’s Closet boutique offers an essence of personal styles inclusion on the latest stylish trends for plus size women. Also, it targets to provide exclusive personal services that consist of a thorough style assessment for its customers. Currently, Inside Rosita’s Closet Plus Size Women Boutique is organized under a sole proprietor. Even though the primary goal is to open one boutique store, extension plans take establishing a well-acknowledged brand name the store into account. Once the primary asset of Inside Rosita’s Closet is launched, the brand quality for plus size women will separate Inside Rosita’s Closet from other boutique stores. Also, the company will follow fashion trends while taking into consideration our customer’s preferences. The boutique store will exclusively centre on the styles and sizes to flatter the female plus size figure. The company’s pricing organization will remain elastic, as it will put into action suggested by the customers
The business will earn its revenue from its consumer’s purchase of its products. Rosita’s Closet requires $223,000 to start up effectively. Currently, the company has saved a total of $100,000 through personal investments and checking. Therefore, Inside Rosita’s Closet is in need of additional funding through business loans as it is under sole proprietorship. A large part of the first investments will be put into securing business equipment and inventory software. Then the remaining small share will be invested in creating an online clothing store. The existence of e-commerce tools that will offer a simpler technique to build an online clothing store. Inside Rosita’s Closet is yet to set up a physical location selling plus size women clothing. Presently, the business has identified a gorgeous area surrounded by numerous restaurants, an ice-cream shop and a candy shop. The building located in this area offers a space lease of $15 per square foot. Therefore, Inside Rosita’s Closet has agreed on a two- year space lease on 1000 square feet for its commercial space. Considering the start-up needs for the floor and wall decorations, $40,000 is estimated, of which the owner will inject 50%. For future benefits of the company, the company has secured $3,000 for internal renovations of the commercial space with the installation of internal dressing stalls. Also, the company will have access to a loading dock as it will be strategically located at the town square.
Inside Rosita’s Closet, annual gross sales are estimated at £250000, including the exclusive personal services. The goal is to keep gross sales slightly more than 6% per year so as to ensure a manageable profit margin. As money is the bloodline of most businesses, a financial plan for the start-up money is required. The best financing option for this business so as to obtain start-up needs for this business is self-funding. This type of financing is effective since the business will be a sole-proprietorship business. Also, the business is first time entrepreneurship; thus, it requires a financial plan for potential success. From self-funding, money can be raised individually, with friends and family contributing. This type of financing is characterized by fewer regulations and lowered costs of raising. With these individual personal savings, it becomes mandatory to be tied to the business. Therefore, self-funding requires the stretching of resources and taking business risks. The unknown business risks provide a basis for stretching of the available resources to cover most of the requirements to start the business.in the businesses later stagers, investors will start to consider investing in the business.
Financial ratios offer companies and businesses a standardized method of measuring liquidity. Inside Rosita’s Closet, the liquidity and common size ratios are preferred in measuring its progress in the short term before it becomes a long term project. “Financial ratios measure companies’ operational efficiency, liquidity, stability, and profitability, enabling companies to assess their relative strength by performing simple calculations on income statements balances sheets and cash flow statements” (Komala et al., 2013). The common size ratio is an efficient way of looking at Inside Rosita’s financial statements. The process of common ratio calculation gives insight into the analysis of the business from period to period. Additionally, this ratio offers a context for the company’s data. This makes it easier to make significant comparisons of the clothing boutique to other businesses. The common ratio analysis helps spot key factors that may be affecting the company. Hence, these provide a basis to make decisions about the future of the company. Current ratio analysis is vital in evaluating the financial statements of the company. Common size ratios will help in determining the company’s profit margin; therefore, the gross profits of the company can be known.
Liquidity ratios reflect on the company’s financial health. This ratio will give an insight into the cash available as this business is a sole proprietorship business. “The quick ratio measures the ability to access cash quickly while the current ratio measures the company’s ability to generate cash to meet short-term financial commitments” (Blank et al., 2020). The quick ratio, also known as the “acid test” ratio since it gives an apparent awareness of the company’s liabilities. The quick ratio will provide insight into whether the company can meet most of its requirements in hostile circumstances. Having an adequate quick ratio will help the company in overcoming adverse situations in the clothing business. Unlike the quick ratio, the current ratio reveals the present financial strength of the company. It merely reflects the creditworthiness of the business. In addition, the current ratio defines if the company will have enough assets to overcome the current liabilities. This ratio helps in decreasing the number of current obstacles while increasing the number of current assets. Inside Rosita’s Closet Plus Size women Boutique will benefit from the liquidity ratio by giving insight on its overall performance, thus, keeping track of the business health.
Entrepreneurial financing is fundamental in resource and finance allocation into new ventures such as small business start-ups. It provides insight into the challenges that businesses will face and elaborates on how to overcome these liabilities. Since new businesses are essentially different from other established and acknowledged businesses, financial entrepreneurship is vital for a start-up. Also, entrepreneurship is fundamental in financial management in start-up companies. It reflects on the businesses’ ability to manage and acquire financial stability to grow and invest. Through financial entrepreneurship, Inside Rosita’s Closet will be able to venture into the clothing business essentially. In short, the company will be able to address its liabilities and come up with assets to overcome them.
References
Blank, S., & Dorf, B. (2020). The start-up owner’s Manual: The step-by-step guide for building a great company. John Wiley & Sons.
Komala, L. A. P., & Nugroho, P. I. (2013). The Effects of Profitability Ratio, Liquidity, and Debt towards Investment Return. Journal of Business and Economics, 4(11), 1176-1186.