Raising capital

Many businesses fail, often within the first two years, for one simple reason: they are undercapitalized, or simply have not obtained enough money to get their business started or through some rough patches. So raising enough money, or capital, to start, maintain or expand your business is always a top priority.

Figuring what you’ll need

The amount of money you’ll need to start your business will depend largely on the type of business you’re in.

For example, if you have to rent storage space, you’ll typically need money for a security deposit and possibly up to three months of rent plus equipment, furniture and communications set-ups, including fax, phone and computer. You’ll have utility bills, too. If you’re in a retail business, you’ll need to figure out how much inventory you’ll need on hand.

And for any company, of course, you’ll have salary expenses, marketing expenses and other costs of doing business, ranging from insurance to transportation (you might need a van or truck) to garbage collection. In making these calculations, you may want to be conservative, assuming that some costs may go up, and there are likely to be circumstances that you didn’t anticipate.

One rule of thumb is that when you start a business you should have enough cash on hand to operate it for a year. And you should have enough to pay yourself a salary. If you don’t have income from your business, you won’t be able to pay your personal bills.