Entering into a new “business for self” venture is most risky at best. Substantive demands can by placed on the entrepreneur’s financial well-being, if proper planning is not completed to enable informed decisions. While completion of a formal business plan should provide the information to soften/mitigate the overall financial risk, valued preliminary planning can provide the comfort needed to pursue this more formalized process that includes;
- the business proposal, goals and achievement plan
- management background, skills inventory and roles within the business
- market analysis identifying and describing suppliers, customers and competitors
- project costs and financing, cash flow and profit analysis.
- time lines and schedules
The aforementioned preliminary planing process, from a financial perspective should answer the following basic questions.
- How much of a wage/draw do I/we require from my new business.
- How much in sales do I/we require to break even or make a profit.
- How much capital do I/we require to open/operate and where does it come from.
- How much cash do I/we require to sustain day to day business.
The preliminary exercises relative to these questions are as follows.