Planning Weeks 9-10

How Find Cash and Manage It

It’s smart to know in advance how much money you need to start and run your business for the first year.

The vast majority of our start-up clients have invested well under $10,000 by the time they officially open for business. And since many work from home-based offices, they are often able to run their businesses for less than $500 per month.

As you can see, the needs of the business for cash investment are relatively low in many cases.

Funding the Family Budget

But, there is another very important consideration you must make regarding your needed level of working capital – how many dollars you feel you need to have in the bank to cover some or all of family expenses for some reasonable period of time, say six months, until such time as you are bringing in regular sales revenue.

So, your need for working capital may look like this:

Start-Up Expenses
$5,000
Business expenses for six months ($500/mo)
$6,000
Living expenses for six months ($2500/mo)
$15,000
TOTAL
$26,000

Once again using the experience of many of our start-up clients, often the client is able to raise this level of working capital solely from his or her savings.

How To Do It

1. Ways to Find More Capital

If however, for some reason your experience and intuition tell you that you will need substantially more working capital before you launch, then you need to be more imaginative in seeking sources of capital.

The most common sources of capital we see our clients using today are:

– Business Credit Card.
– Home equity line of credit.
– Business line of credit (tied to business bank account).
– Loan from family member (secured by love).
– Personal loan (dependent upon good Credit Score).

2. How to Manage Your Cash

Most new businessowners operate in a mental state that looks a month out into the future.

So, when examining your cash flow situation, you need access to information that permits you to answer two questions: – how much must I pay in the next thirty days; and how much cash do I have in the bank?

Here’s how we suggest to do this.

– Buy an according folder with the months of the year on the tabs.

As each month transpires insert all bills you receive into the appropriate month.

– Create a spreadsheet and write in any monthly expenses that are either paid directly from your business checking account or via credit card.

– Make sure you have online access to all business bank accounts.

– Go into your account at the start of each month and see what amount of cash you have.

– Total up all expenses to be paid the month, either from an invoice, a direct pay or via credit card.

– Do a quick comparison. Ask yourself – do I have enough cash to pay all bills on hand.

If not, you need to deposit more cash into your business banking account.