I said it once and I’ll say it again, businesses fail because they either have a crappy manager or a flawed business plan that should have been discovered before the first “brick” was layed. However, businesses also fail becuase they are not sufficiently capitalized.
The capitalization costs associated with your startup are something that should be well defined in your business plan. Unfortunately, sometimes plans do not match reality. That is why your capitalization plan is one of the most important aspects of your startup. Now, if you’re bootstrapping, it’s not such a big deal. But, if you’re building something serious, you have to account for planned and unplanned costs. It’s a daunting task to say the least.
Most important, have a PLAN. Not just the big picture. You need a real business plan — spreadsheets and all. Figure out QuickBooks — get training if you need it. You’re a big picture person? Too bad, the details are where it’s at. Get comfortable with the idea that outside of being well-funded, you need to analyze every transaction in your business. Your investors will definitely want to know what your profitability report looks like. Know your books, period. Now, some of that comes after capitalization, but the reality is you need a plan BEFORE you get to that point. Plan as if. Act as if.
I’ve consulted for businesses that have bootstrapped and financed and the singular conclusion I have drawn is that in both cases these businesses’ success hinged upon their level of organization and planning. I know it sucks. Just suck it up and do it.
