Entrepreneurs tend to spend too much time looking
for money and not enough time making money. This
problem stems from the lack of adequate pre-planning
given to the initial use of funds. In order to
determine what your short and long term capital
needs are going to be, you must perform accurate
financial projections.
Items to Consider In Your Use of
Funds:
Immediate Need For Capital
(Bills to pay) Research and Development
(Estimate, then double) Capital Asset Acquisition
(Required equipment, equipment lease, equity, equity
placement) Inventory Floor Planning
(Necessary raw materials) Working Capital Requirements
(Payroll, payables, etc.) Market Penetration (When will
the cash flow begin)
The Cash Flow Model:
The cash flow model is the best tool for determining
what your capital needs will be. Don't be overly
optimistic or conservative, either one will hurt
you. Know what factors will affect your projections
to the downside, (sales, costs, price breaks, etc.).
Work closely with third parties, financial advisors,
accountants, industry consultants, retired
executives, etc., to keep from having tunnel vision
and missing the big picture. Your cash flow model
should be month to month for one year and quarterly
for the next four years.
