Starting and Managing a Business – LaunchPad Studio Business Model

Question 1

Singapore’s workforce has seen a significant shift towards hybrid and remote working arrangements in recent years. Knowledge workers, freelancers and small business owners increasingly seek flexible workspaces that provide not only a desk, but also a supportive community and professional services. Traditional co-working spaces often cater to larger start-ups or corporate teams, and may not always meet the needs of solo founders, freelancers and very small teams who require a more personalised and affordable environment.

You identify a business opportunity to start an independent hybrid co-working and entrepreneurial hub that targets:

• freelancers and remote workers,
• solo entrepreneurs and micro-business owners (1–3 staff), and
• early-stage founders who require a professional space to meet clients, run small workshops and access basic business support.

Your concept, “LaunchPad Studio”, combines:

• hot-desking and dedicated desk plans,
• small meeting rooms and a cosy event space for up to 20 participants,
• add-on services such as basic business clinics (e.g., accounting, branding, digital marketing workshops) in partnership with external professionals, and
• a small pantry area with complimentary beverages to encourage informal networking.

To ensure accessibility and visibility, you intend to locate the business within walking distance of an MRT station in a mixed commercial–residential area.

However, starting and operating such a hub requires significant initial investment in renovation, furniture, IT infrastructure (Wi-Fi, printers, access control system), and working capital for rent and staff salaries. You do not have sufficient capital to start the business on your own. You have therefore approached a potential investor who is open to the concept and is prepared to provide funding through a mix of equity and an interest-bearing personal loan. You will need to prepare a business proposal, and a short presentation to the investor to formally seek funding and offer some equity in return.

Required

You are to construct a Business Model Canvas to analyse the opportunity for launching

“LaunchPad Studio”, an independent co-working and entrepreneurial hub, in the Singapore market. 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.

Guidelines And Assumptions

1. The primary revenue-generating activity of the proposed business must be an independent co-working and entrepreneurial hub. Operating as a franchised unit or under a global co-working brand is not allowed.
2. The proposed location will be a 2nd-floor commercial unit at PLQ Mall (Paya Lebar Quarter, 409051). There is one unit available: 1,400 square feet at a monthly rental cost of $10,500. The unit is unfurnished bare but in ready-torenovate condition. There is a minimum lease period of three (3) years.
3. 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. Subletting is not allowed.
4. The first month of operations is the gestation period of the new business (renovation, furnishing, staff recruitment and training, marketing launch, etc.). The first revenue can only be received from the second month onwards.
5. The depreciation for any capital expenditure (e.g., renovation, furniture, equipment) is based on straight line over three (3) years.
6. You will invest $70,000 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 an 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 offered to the investor. The remaining shortfall in the Balance of the TIR will be extended 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 on the 36th month.
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):                                                                        E                                      D
                                  WACC         =        x  R_e          +        x  R_d           x   (1 – T_c)
   V                                     V
   ➢ R_e = Cost of Equity
   ➢ R_d = Cost of Debt
   ➢ E = Funding from Equity
   ➢ D = Funding from Debt / Loans
   ➢ V = E + D (i.e., total funding)
   ➢ E/V = Percentage of Financing that is Equity
   ➢ D/V = Percentage of Financing that is Debt
   ➢ T_c = Corporate Tax Rate at 17%
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.

1. Executive Summary (Maximum 500 words)

2. The Business Model  

2.1 The Business Model Canvas

2.2  Analysis of Each of the Business Model Canvas Components based on Research Data

3. Financial Analysis

3.1 Key Assumptions Made and Excel File Attachment (as icon)

3.2 3-Year Pro-forma Income Statement (1^st to 3^rd year displayed on a columnar monthly basis)

3.3  3-Year Pro-forma Cash Flow Statement (1^st to 3^rd year displayed on a columnar monthly basis)

4. Investment Proposal

4.1   Total Investment Required, Proportion and Justification for Equity-Debt Ratio required from Investor

4.2   Expected Financial Returns:

• Weighted Average Cost of Capital (WACC)*
• Valuation (based on the discounted cash flow method)
• Net Present Value (NPV)
• Internal Rate of Return (IRR)*

You must use the following rates in your calculations:

• Cost of Equity (R_e) at 12%
• Cost of Debt (R_d) at 7%
• Corporate Tax Rate (T_c) at 17%

4.3  Percentage Shareholding Offered to Investor

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Expert Answers on Above Business Management Assignment Questions

Executive summary

Launchpad studio is a hybrid coworking and entrepreneurial hub in Singapore that provides flexible workplaces, meeting rooms and business support services to freelancers, remote workers and micro business owners. The main source of revenue for the company includes rents from the desk, event speech booking and value added services. The main focus of the company is to provide a community given alternative to coworking spaces, keeping in view the rising demand for a flexible work environment. The financial projection indicates that there are positive growth opportunities available from the business concept.

Business model Canvas

The key components include the customer segments which are the freelancers, remote workers and early stage startups. The value proposition of the company includes affordable and flexible workplaces to support business activities. The channels utilised by the company includes website, social media and referrals wild customer relationship focuses on membership plans, networking events and personalised support. The revenue stream of the company includes the rents from the desk, meeting room booking and service partnerships. The key resources include the physical space, iT infrastructure, staff and partnerships with key professionals including accountants, marketers, trainers and service providers.

Analysis

An analysis of the given model indicates that it emphasises on underserved segments which includes freelancers and micro teams. The value proposition is achieved through flexibility, affordability and community support. The risk is significantly minimised through revenue diversification and partnerships positively improves service offerings without high fixed cost.

Financial analysis

The key examples include an occupancy rate of 50% to 80% initially and grow gradually with a fixed rental income of $10000/month. It is also assumed that the revenue starts from the second month and depreciation is applied on a 3 years basis. The operating cost will be stable and there will be good growth opportunities possible. The income statement projections indicate that there will be a small loss in the first year of operations and the business will break even in the second year, and there will be good growth opportunities in terms of profitability performance from the third year because of higher occupancy.

Investment proposal

The funding structure for the concept is estimated to be $60000 made by the founder, and 40% through equity financing, and the remaining by bank loan at 7% interest.
The financial returns in terms of weighted average cost of capital indicates an approx 8% to 10% on the basis of structure, and the net present value is positive which suggests the project is good enough to go ahead.

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