Your first three years of business are critical to your
success - or failure. Not only do start-up businesses have
heavy one-time, up-front expenses, but they're also tight
on cash and funding. So your first task is to create a
realistic budget. This acts as your blueprint for success.
Your preliminary budget outlines expected and conservative
income figures. Start with broad expense categories like
utilities and income, breaking these out into more detailed
line items like Utilities: telephone, Utilities: gas,
Income: paperbacks, Income: hardbacks, and so forth.
Expenses are typically easier to project than income. But
income grows more and more predictable as time goes by. For
this reason, review and adjust your budget quarterly and
annually based on new data. (We'll talk more about this in
the final installment of this series).
Differentiate your one-time expenses (business license,
legal fees, signage, sales literature, and so forth) from
your ongoing expenses (leasing, utilities and insurance).
Project figures out a full three years with growth
dependent on market research or educated estimation. Add an
extra 25 percent to all expenses to cover unforeseen or
emergency events.
Survive on as little capital investment as possible during
your first few years to ensure survival until you reach
profitability. Buy and budget only those items necessary to
generate revenue. Organize your budget into fixed and
variable expenses. Your fixed costs are those which remain
stagnant from month to month, including your building
lease, utilities, advertising and insurance, while your
variable expenses are typically dependent on sales, like
commissions, inventory and shipping.
Avoid optional or unnecessary purchases. Nearly every penny
you save goes into your pocket. So don't give in to
temptation by spending $1,000 on a new desk. Buy only
what's necessary to generate revenue and allocate money
toward items receiving the strongest ROI. You can always
upgrade down the road once your businesses is better
established and income is more predictable. The leaner your
organization, the better.
Finding Funding
Every business needs start-up capital. These funds help you
purchase furniture and fixtures, computers and inventory
while still bringing in a livable wage during the first few
years when most companies see more red than black. But how
much you need and where this funding comes from differs
from business to business.
According to a Biz$hop article for Wachovia, the country's
fourth largest bank and diversified financial services
company, more than 17 percent of start-ups launch with less
than $5,000 cash. So before you develop a funding
acquisition plan, calculate how much money your business
can realistically generate to finance its own expenses.
Then define exactly how much money you need to cover
necessities, expansion or possible risks.
Start-ups have several options for acquiring funding - from
mom and dad to venture capital partners. Begin with your
own resources including savings accounts or home equity.
Next, tap into your family and friends. Next, research
venture capital firms. These are companies that finance
start-up ventures who have limited access to capital
markets but need quick growth. Angel investors are another
source of business financing. Angel investors are
successful entrepreneurs that have money to invest in other
companies. Newspaper ads and person-to-person networking is
the best way to find angel funding sources. The Small
Business Administration (SBA) also licenses Minority
Enterprise Small Business Investment companies (MSBIs) and
Small Business Investment Companies (SBICs) to help fund
critical growth stages.
Many small businesses have survived the first few years
using credit cards and personal loans. Working or
investment partners can bring in funding or services that
can save your company money. For instance, if you partner
with an attorney or a designer, you save a great deal on
legal or design fees. When you need stronger financing,
you'll need to discuss these goals with a commercial bank,
savings and loan or finance company. You may qualify for a
small business or SBA loan or line of credit. But make sure
you have sufficient collateral to guarantee funding in the
event of default. Borrowers want to make sure they give
credit to start-ups that have as much confidence in their
own success as the bank would be offering in loans.
----------------------------------------------------
Clinton Douglas IV, writes E-Business articles for people
who want to achieve more online success. Learn Today, "How
to Start an Online Business in less than 30 Days starting
from Scratch"! Free Special Report - Limited Time! Plus,
weekly newsletter from Online Empire Secrets (A $400
Value). Click Here ==> http://www.clintondouglasiv.com To
get Your FREE REPORT!
No comments:
Post a Comment