Identifying Your Start-Up’s Financial Needs

Abstract

The financial requirements of a proposed business can be determined by identifying and estimating several key elements. First, capital expenditure (CAPEX) includes all the assets needed to start the business, such as equipment, machinery, renovation, and vehicles. Second, working capital covers the day-to-day operational expenses including administration, marketing, utilities, staffing, and production costs. In addition to these, businesses must account for other start-up expenses that do not fall under assets or working capital, such as deposits, licensing fees, initial professional services, and one-off setup costs. Finally, it is important to include a contingency cost, usually a percentage of total expenses, to accommodate unexpected financial needs. Together, these components provide a complete picture of the capital required to successfully start and sustain the business.