If you do not put up enough money for Working Capital, you will be forced to incur debt or inordinately prolong accounts payable so that you get into trouble with your suppliers. Not having adequate Working Capital will place your business in an unsustainable cycle of debt.
After you have determined the amount you need for the fixed assets you have to acquire to be able to operate, you have to add to this amount what you need for Working Capital.
To determine Working Capital:
1 find out how much it takes to produce one unit of your product
2 …read more

After you have determined that you have a marketable product or service and there is an accessible market sufficient to meet your profit objectives, you want to know how much money you need to put up for the business. Oftentimes, the focus is on the fixed assets; e.g., office improvement, production & office equipment, furniture, etc. Not enough attention is paid to the Working Capital, i.e., what you need to actually operate.
If you do not put up enough money for Working Capital, you will be forced to incur debt or inordinately prolong accounts payable so that you get …read more