Finance is called the life blood of a business. Unless you have enough finance to meet your business expenditures, it is almost impossible to move it towards success, whatever the business may be.
The financial requirements for a new business can be enlisted under the following categories.
a. Cost of fixed assets including land, building plant and machinery, furniture, etc. The amount invested in these items are mostly of one-time nature and they are called fixed capital.
b. Cost of current assets including cash, marketable securities, book debts, bills receivables, inventories, etc. for the second category. The amount invested in these items is called current capital since they are recurring in nature.
c. Cost of promotion including the expenses on preliminary investigation, test marketing and legal advice, etc
d. Cost of setting up the organization
e. Cost of establishing the business. These are operating expense or losses which have to be met in the initial period of the business.
f. Cost of financing. This includes brokerage on securities and advances received, commission on underwriting, etc.,
g. Cost of intangible assets. These are called intangible since you cannot touch them physically but you can give a value to them monetarily like goodwill, patents, etc.
The first two items of the above list has to be given most importance than the rest of the items since the success of any business or concern largely depends on them generally.
How to estimate your business capital requirements?
If you promote a business you must fully aware of the fixed capital requirements. If You are not familiar in technical aspects, you can go for the assistance of technical expert.
You have to find out and add up different fixed assets by properly searching for information about them. Any error or mistake in this stage will have a long term adverse effect on your business. So, be careful enough when estimating the business capital requirements.
Usually Fixed Assets cost will be higher than the current assets cost.
In every business estimating the fixed capital requirements is based on the following factors.
They are
1. nature of the business
2. size of the business
3. scope of the business
4. extent of the period of the business
5. Contracts, Sub-contracts needed in the business
6. Technological and location factors
7. Availability of fixed assets at discounted rates
8. Economical and population trends in the business you decide to start
9. Level of Demand, need and scarcity from the point of view of the end users who are called consumers.
10. Many other factors which are not included in the above categories.
So, if you take a scientific and systematic approach while estimating the cost of business capital requirements for your business, you may open the ways of success in your business considerably.
Article Source: http://EzineArticles.com/6149713
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