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How to Keep a Startup Afloat in a Sea of Uncertainty

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Money. Image credit: all-free-download.com

There are key things you need when you go full throttle into setting up your own startup company. After the location, staff and products are finely tuned, you should focus next on the finances. While it is great to have a dream and a product you think can change lives, if you do not have the right amount of capital behind you, you will not be able to get that product anywhere. It is very easy to run out of steam and resources at the start but there are things that you can do to prepare yourself. It just takes a little forward planning on your part, but it makes all the difference.

Your Business Assets

What do you need now and in the long run? It is your inventory, the equipment, computers, machinery, tables – everything. At the start, make a list of everything that you will need at the beginning, and these will be your starting assets. This does not include the money you already have. For each item that you have, make a guess of what each item will cost you. If you have no idea, either estimate or do some research.

Your Business Expenses

This is not the same as business assets because not everything that you buy is classified as an asset. Business expenses are things that you can spend your business money on if it is an essential component of the business. For example, paying your employees is an expense. Time for some math! Add the starting expenses and the starting assets together. This will comprise most of your starting costs.

Calculate the Amount of Money You Need To Start the Business

You will need to know how much money you need in the first few months of the business. That time is the most uncertain. However, there are different schools of thought as to what the period actually is; some people say either 6 or 12 months. To estimate over the first year is a more recommended approach. Estimate the sales, expenses, the cost of the expenses, and the expenses themselves over the first 12 months. To get a better idea of what your total may be, making a sales forecast can help.

Altogether, you should have a report or forecast of the first 12 months, comprising your monthly costs, estimated sales, and your expenses. Deduct the costs and the expenses from the sales for each month. That will then help you to see if you are short of money each month. Then you can begin to get an idea of how much money is required to keep the business afloat or to break even. Using this method to figure out your finances at the start makes for an essential part of the business plan. If you don’t have one ready, then doing these calculations is already a good start!