Staring a small business requires a lot of time, patience, energy and cash. Unfortunately, many small business owners don't plan accordingly. Read the following snippet from our ebook "The Top 5 Reasons Small Businesses FAIL" and understand what you may need to make sure you are going to be in business long enough to realize the success you dreamed of.
To get the entire ebook, please visit our website SmallBiz-Tools.com to sign up for your very own free copy. Plus find ways we can help you run your business accounting and tax time needs!
Two Kinds of Cash…
Cash to Get Started
Most small business start-ups vastly underestimate the amount of money they will spend getting started. This is partly because purchasing equipment isn’t the only start up expense. Paying yourself a salary is also a critical start-up expense, as your personal bills need to be paid! The cornerstone of your business plan should be a complete and detailed budget for you personally, and for your business. In addition, once you have added up all your expenses, add at least 25%. If you think that sounds high, Nick Hodges, owner and founder of NCH Wealth Advisors, has all his small businesses DOUBLE their estimated start-up expenses! Here are some important questions you need to answer:
- How much do you need to fund start-up?
- How much capital do you have?
- How much do you need personally during this time?
- How long can you and your business last on the capital?
Some of the most frequent questions I am asked are, “Where do I get start-up capital for my business?” and then, “What do you MEAN there aren’t people lined up to give me $250,000 for my brilliant idea?” Most successful small business are funded with start-up capital from their own pockets. Occasionally it is funded with funds from other family members. Angel funding, venture capital, and bank lines are VERY rare for start-up or small companies. Outside funding of capital is the exception to the rule, and generally, those that do secure it, have a track record of starting successful businesses.
Cash to Keep Going
Any successful business owner will tell you that their primary business focus is sales, and most other things come secondary because sales generate cash flow and cash flow keeps the business going. Cash flow helps you perpetuate your business. If you do not develop a strong cash flow in the beginning and understand how best to manage it, you will burn through a LOT of capital fast!
In the previous section, I introduced the idea of cash flow by asking, “What is your target revenue or production?” The other question you need to answer is, “How many sales to you need to make before you are profitable?”
Remember, it takes money to make money. Make sure your small business has enough capital to get started and enough cash flow to fund success.
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Posted by: sliding wardrobes | 12/23/2010 at 06:42 PM