It is one of the most beautiful compensations
of this life that no man can sincerely try to
help another without helping them self.
-Ralph Waldo Emerson-
The learning curve for start-ups is very steep. Even if you have a lot of experience in the business there will be unexpected challenges. In our experience no start-up ever goes as planned. Your best defense - and this will affect your financing plans - is to talk with as many other business owners who have gone through start-ups similar to yours as you can find. Ask your banker, accountant, friends, trade associations, and other informed folks. While much of the advice and other informed folks. While much of the advice you receive will be anecdotal and perhaps not pertinent to your situation, much will be relevant. More important, it will make you aware of he kinds of challenges that you may have to address. The key question to ask is: If you knew then what you know now, what would you have done differently? While every start-up is different, there is a common set of problems they all face.
Start-ups face lots of competition. You have to know these competitors are in order to satisfy this important question: Is there enough room in this market for another player? You can get data from trade associations on how large a market is needed to support your hardware store. If there are two stores in your area already, will there be room for you? What if one of them is a "big-box" store, like Home Depot or Wal-Mart? By paying attention to what the competition does you may be able to find an undeserved niche that can become a profitable market for you. It always comes down to marketing! How can you attract and satisfy the customers you compete for? Are there enough of them? This is vitally important in making your sales projections.
The first question investors ask are, "How much?" and "What for?" Therefore, you must push a detailed cash-flow projection (a cash budget) to determine how much cash your business needs. Go out, month by month, until the cash flow turns positive. The deepest point of cumulative negative cash flow gives you a clue about the size of investment needed to make your business work. The rule of thumb is then to double that figure, thus ensuring that surprises and shortfalls will be covered. If you are wise you'll also prepare a personal cash flow to determine what your own financial needs will be and make the decisions about where that cash will come from before draining funds from your new venture.
They know enough who know how to learn.
-Henry Adams-
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