The Beginning Business will need to decide what is needed and either buy or finance the necessary items. For example, a retail store will need an inventory of goods to sell. A restaurant will need a kitchen and some food to cook. Buildings or offices are necessary for most firms.
What Is Needed? Should You Finance The Items Required For Starting Your Business? Here are some thoughts.
What exactly is needed depends on the nature of your business. Certainly, some marketing materials like brochures should be designed and printed. Some travel to buyers and mailings may be needed. A beginning inventory and the tools to manage inventory will be needed. This includes the systems to count and track items as well as the systems to move it. Add to this the serious items like raw material to manufacture and the buildings and equipment to do business.
In a previous post we discussed a checklist of 29 steps when starting your Business. This
topic was number: 6. Lease or purchase the equipment, inventory, or raw materials needed to start up.
The previous post had a list of 29 steps. Each step is being used as the subject for separate blog posting. Check out the original steps list. You can find links to the blog with details on each subject.
For a few businesses, like the business consultant who works from home, the start-up requirements are not a major item. But for many businesses, having the right equipment or holding the right inventory can be a critical part of being successful. For one, you have to have enough inventory on hand to sell. It must be available when there is a demand. You have to have kind of inventory that customers want. For the manufacturer, the firm needs enough raw material and sufficient production capacity to product the items to sell to meet demand. The business should never miss a sale for lack of products on hand.
A beginning business will need its start-up requirements to be where they will be used and in good working condition. There is a quality aspect of the acquisition of equipment, inventory or raw materials. Good quality may mean the growth of sales and the customer base. Do not underestimate the value of quality. The price paid for quality is often the cheapest price in the long run.
The investment in equipment, inventory or raw materials is where many starting businesses underestimate cost or fail to make plans to have the needed funds. In business, when you run out of money, you fail, so it is important to arrange to have enough money to buy everything that is needed. A good practice is to include the equipment, inventory and raw materials in the business plan. Talk about all the alternatives and possible outcomes. Then, decide where the money will come from. This is discussed in two previous posts, Business and Marketing Plans and Cash Flow.
Most starting businesses do not have the money and turn to leasing or borrowing. At this point it is good advice to seek the input from legal and accounting professionals, since both will have something to offer to the decision.
A loan or lease that does not fit the needs for business start-up can be fatal. Think about your expected growth and the need for flexibility. Do not spend a lot of money or make a commitment for things that are not necessary. Stay within the limits of what you can do.
Talk to people and get as much information as you can when deciding your start-up requirements. It is common to use consultants and check with others in the business. The more people that review the start-up and resources purchase plan, the better. For the business start-up ready to benefit from consultant input, contact William Beckett. Call me today to talk about some of the start-up costs you might have forgotten.