Determine your financial needs and raise funds to meet these needs. You can begin a sari-sari store from your own personal savings. A garment factory, on the other hand, will require more elaborate arrangements for fund sourcing.
Generally speaking, the financial requirements of a business may be classified into Fixed Capital, Working Capital, and Pre-operating Capital.
•Fixed Capital includes cost of land and building, or lease deposits of them; cost of improving the land or remodeling the building; machinery and equipment; furniture, furnishings, and fixtures. These are usually one-time expenses, meaning they are generally good for the duration of your business.
•Working Capital is the reserve money you need to run the business until it becomes self-supporting. This may take about one to six months or even longer. You need working capital to purchase your raw materials, pay your workers, pay for transportation, telephone, electricity, and water bills.
•Pre-Operating Capital includes money that you spend to register your business, acquire licenses for franchises, or pay a lawyer or a consultant. In other words, this is money you spend before your business begins to operate.
It is advisable to prepare a forecast that outlines all these capital requirements. Be sure that no significant item has been overlooked. Be realistic and do not underestimate your requirements. Provide for contingencies and a margin of safety in estimating your capital requirements to avoid cost overruns later. Your capital should be enough to cover unexpected expenses. Observe the equipment and manpower requirements of other business establishments. If in doubt, ask a knowledgeable friend, an accountant or consultant to see if your estimates are realistic or not.
