DUPONT JOBS NC

Obtaining more than enough capital may seem like a blessing at first, but it can breed a lax attitude toward expense control. "If you have it, spend it," is not an advisable motto for a new company. If the investment takes the form of equity, raising too much money means that the founder's share of the business was reduced more than was necessary--and this violates one of the maxims of entrepreneurship: hold on to those equity points!

Typical advice given to entrepreneurs is to do a cash flow projection, or cash budget, and then add 10%, 20% or even 50% to this amount, for "contingencies." These contingencies are all the things that can go wrong in a start-up venture, all the unfavorable events that can negatively affect results.

1. Contingency planning is a skill that does not come easily to all entrepreneurs--even those with a finance background. How do you get the cockeyed optimist (what you absolutely must be to even conceive of the idea of the starting a company), who expects the best, to plan for the worst?
2. To stimulate contingency planning, it helps to look at the reasons why entrepreneurs so consistently run out of money; among these are: Not realizing how expensive it is to introduce a new product, especially consumer products, on a national basis.

Not realizing how long it takes to introduce a new product, or for the market to truly accept the product. Delays in regulatory approval, municipal zoning, or patent approval.

Assuming that a small start-up company will get the same forbearance on payments and favorable terms that a large one will.

An entrepreneur with an early stage company must be prepared for one or more of these situations to occur. Contingency planning doesn't mean simply adding a percentage or dollar "cushion' to the amount of capital being sought from investor or lenders. It is a way of thinking--a recognition that the entrepreneurial road is always rocky. Envisioning what might go wrong does not equate to entrepreneurs losing faith in their product or their company; it means they accept these difficulties as steps on the path to prosperity.

As much as I can get! This would be the answer readily shouted out by most entrepreneurs. The fact is though, both over and underestimating the amount of capital needed to fund a business can have serious negative consequences.