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Being able to anticipate the capital needed to carry out work in the business
is of crucial importance.
If you are short of capital to carry out your plans it can be terminal to
your business. Cash crisis is often a killer of new businesses.
Raise enough capital
Obviously, there are many reasons why a company runs short of cash, but one
reason can be that the entrepreneur has not been able to raise enough funds to
meet the actual financial requirements arising after the setting up.
This problem is avoided by securing that your business is injected enough
capital to meet its requirements.
The two most frequent reasons that a company is undercapitalised are:
- From the beginning the entrepreneur has sought to save money or limit
the expenses
- Sales are slower than anticipated – consequently, the entrepreneur runs
into cash problems due to lack of income
Penny-pinching
Generally, limiting expenses or saving money is not advisable as this also
limits the firms activities and ability to progress.
Thus, you must anticipate the necessary costs of realising your concept and you
should not doubt the necessity of such scheduled costs.
Poor Sales
Oftentimes, getting things up and running takes longer than anticipated.
Starting up as an entrepreneur, you first have to gain a competitive profile,
call attention to your existence and your competencies, convince customers of
your expertise, etc.
This is time-consuming - VERY time consuming! If you think it will take six
months to get sufficient customers you should multiply this by at least two,
just to be on the safe side.
Budgeting pessimistically
Therefore, it is important that you have enough capital to stand up to the hard
and financially sluggish initial period. You can take this penetration phase
into account in your budgets by budgeting pessimistically or set forth a
worst-case-scenario.
Its purpose is to identify the worst possible situation for your company
(slower sales than anticipated or non-existent sales) and try to estimate the
cost of such a situation.
The essence of business start-up funding is to inject the required capital into
your business. This allows you to dispose and act in anticipation of unforeseen
events to prevent such events from inhibiting the operations and growth of your
company.
- Calculate
your needed turnover and sales - easy online tool
Download free templates
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Copyright © 2009 Dynamic Business Plan 21-05-2012
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