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THE FINANCIAL SIDE - Part I

© Barbara Massie

Many small businesses fail because of the lack of funding. It is true, "You must have money to make money." Many fail for lack of financial expertise and planning. Of course, you are in business to make money, but do you have the money to make money? Do you have a plan to make that money work?

Without some type of financial planning, you might muddle through, sell product, take the profit and then put it all back into making more product. In the meantime, you have to eat and pay expenses of living. Most craft businesses do not generate a profit from day one because there are significant start-up costs associated with going into business. Unless you have a vast amount of money to invest in a business, the first year can be very lean. An interesting article Your Financial Profile (Net Worth and Cash Flow) gives worksheets to help you figure your net worth and cash flow.

You must know how to manage the financial side of the business to survive. A well thought out business plan will show the financial side and is a must for borrowing money from a financial institution

To develop a plan you must determine what the business costs will be. Although it is very difficult to predict exact costs, you can make approximate estimates. Plan a budget within those estimates. It is best to get advice when creating a financial plan from an accountant or a knowledgeable financial person. An acquaintance with a business similar to yours, might sit and share what it costs him or her to be in business.

CAPITAL

Where do you get the capital to be in business? Most entrepreneurs use personal money for start-up expenses; some even take out personal loans for seed money. Often family members are approached for investment in a "sure thing." Be cautious about borrowing money or taking investment money from your family; it could spell the start of a family feud or worse. Consider a business loan from a bank or the Small Business Administration (SBA.)

The SBA has not only small business loans for those who qualify, but they also give excellent advice for people in need of start-up money. Look at Sample Loan Proposal to create one of your own. Small Business Legal Forms: Borrowing Money allows you to download the needed forms.

PROJECTING THE FUTURE

To obtain backing from investors or money from a bank, you must be able to project what your future income will be from the business as a part of the plan. When a business is still in

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