Probably the most popular words in every entrepreneur’s dialogue, aren’t they?
Yes, undoubtedly it is very difficult for entrepreneurs to raise startup capital, but this is NOT the worst nightmare. There are worse terrors!
It’s called NEGATIVE operating cashflow, also known as BURN RATE!
This is the #1 mistake I see inexperienced entrepreneurs make, and it kills everyone: business, investors, and entrepreneurial dreams.
Forget about “nightmares.” This is called BURN rate because this is hell!
Never forget this lesson:
When asking for startup capital always include your initial operating expenses. You calculate these numbers with a simple Cashflow Projection.
I made a quick sample for you:
Focus your attention on the yellow line with the red numbers.
If you don’t know what each line represents, click for a.
These red numbers represent the additional cash you will need every single month just to keep the business running. Observe the last line of the projection, it shows the accumulated initial investment needed for the first year of operation.
It’s not easy to calculate accurate numbers, so if you want to sleep well at night, be VERY CONSERVATIVE and talk to your investors about these figures! Having these upfront conversations with your investors is priceless!
Yep, thank me later 🙂
If you think raising capital for an initial investment is difficult, raising money to support a running business that is burning money to keep running is extremely complicated. When this happens you will find yourself in the weakest position for negotiating.
Actually, this is what the sharks at Shark Tank love to smell: Your desperate need for cash is like blood in the water!
They will eat your business for lunch!