A businessman cannot start up a business without any sort of capital. Depending on the venture you want to explore and profit from, your start up expenses may include rental for space, equipment, furniture, office supplies, employee salaries, and fees for permits, legal advice, and accountancy expenses. Financial smarts is the most important skill you need to develop when planning a business venture. What better way to start than knowing what your capital needs is?
There are different financial sources for your start up capital. Again, the decision on which one you will choose will depend on how much you need and how you plan on profiting from your business. If you are a bit vague on what you need to begin your venture, here are the different types of capitalization requirements.
The seed capital is the money you will need for the research and planning you need to do before acting on your business concepts. This is very important since marketing research will help you gain the right understanding of the market you want to tap, plus the competitors you would encounter. A business plan, meanwhile, is essential for you to organize your goals, objectives, market research, strategies to profit, and managing your finances.
The start-up capital and the working capital is the money you will use to open your doors for business and the money you will need to spend on your first year of operations. You need to have this safely ensconced since the first year will be the most difficult phase on the road to your entrepreneurial success. You may find that you will not be able to gain profits from your business to rollover to the next month of operation and this could spell disaster.
The expansion capital, or the mezzanine capital as called by some, is funding dedicated to the expansion programs you have for your venture. This is the financial nest for future opportunities to open another office or expand your market capabilities. For example, you might want to move to another location or build a new branch as your client base grows. As your clients add up, you will need to raise production costs, hire more employees, pay more taxes, and so on. You need to plan for this since businesses will reach that point where you either leave it to be stagnant or level up to the next step in becoming an empire.
Meanwhile, the bridge capital is what you call the financing you need to get you through two phases of financing. If you find yourself in a financial bind because of the account receivables you have yet to acquire, and you need to continue purchasing products, then a bridge capital is what you need.
The money from these different financial funds will go to established business requirements such as licensing, taxes, insurance, payroll, and other office utilities such as rent, phone bills, and electric bills. You will also need to allot money for your marketing and sales related costs such as purchase of products.
Tags: credit cards