BUSINESS SENSE
“USE of Funds” – Week 10
Nancy Larsen, Enterprise Facilitator of SEFP

Entrepreneurs tend to spend too much time looking for money and not enough time making it. 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.

Those projections must consider:
- Immediate need for capital (bills to pay)
- Research and development estimated and then doubled
- Required equipment, etc.
- Necessary raw materials
- Working capital requirements
- Market penetration (when will the cash flow begin)

The cash flow model is the best tool for determining what your capital needs will be. Do not be overly optimistic or conservative, either one will hurt you. Know what factors will affect your projections (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 or annually for the next four years.

Remember – “Anyone who thinks the customer isn’t right, should try doing without them for ninety days”.

Next weeks topic is: “Repayment”

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