Plot Out Cash Flow
The biggest challenge for any young company is "making sure that you have enough capital to begin with and that it will last long enough to determine whether or not the business is viable," says Norm Brodsky, CEO of CitiPostal, in Brooklyn, N.Y. The best way to get your business to the point where it can survive without outside capital is to write a business plan, which Brodsky terms "essentially your best guess as to how you're going to get there."
Basic is better. "I don't mean anything elaborate," says Brodsky. "What I'm talking about is a modified, down-and-dirty income statement andcash-flow statement, real simple. A reasonable expectation of sales by month for a year." Writing a detailed month-by-month plan, he says, makes youfigure out exactly what you're expecting to sell per day.
When Brodsky helped advise a pair of entrepreneurial novices on their first venture, he said to them, "Let's take July. What can you do in July?" The coupleplanned to sell $20,000 worth of product, and Brodsky pointed out that with 20 working days in a month, "that's $1,000 per day. An average order is $40,so you're talking about 25 orders a day, three orders an hour, an order every 20 minutes. For a whole month. Can you do it?" The goal of the exercise,Brodsky emphasizes, is not to dampen enthusiasm. For that couple, he says, the answer was "maybe yes, maybe no. The point was to make sure they weredealing with reality."