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Undercapitalized business—and you’re dead!

 
I have bought my business for PHP 100,000 investment. Amongst all of my business, this is the most expensive one. (For a starter like me).This is actually my 3rd business. My first business started at PHP4, 000 and my 2nd started around PHP50, 000. Both did not need huge amount of money since it requires services. The day came when I decided to invest to this company worth PHP100, 000 using other people’s money.  So I borrowed from my mother and I handed over the cash to the cashier and purchased my products and suddenly I was running my own “new business”. I felt pretty pleased with myself!


Unfortunately, I started making mistakes the minute I handed over the cash. I borrowed just enough money to buy the business and not one cent more. I was right away swamped with bills. While doing my business, I was obligated to small fees that you will not really noticed until you computed it on totaling about Php20,000, which, of course, I didn’t have. So I started borrowing from my previous ongoing small businesses and to my friends as well,for my allowance and some freelance to sustain my ongoing business. All in all, I had got off to a pretty bad start. In many ways the business never really recovered, because I was always seriously short of money. My previous small businesses closed due to my credits and the credit of some people who did not pay me.
If I could turn back the clock and use the experience I now have, how would I have approached the same situation?
1. Think first before you engage yourself into a business; do not use your GUT (Give Up Thinking) feeling. Many people get caught up in the emotion of the moment when it comes to starting a business. Their excitement about the new venture often overshadows their normally strong sense of basis.  There is a lot to be said for having time to cool off and really consider the decision.
2.     I would have taken good care of my previous small business that is working and turn it into a big one.
3.     I would have worked out how much it was going to cost me to operate the business for a full year, taking into consideration all the expenses. After the total figure had been determined, I would have added a 20 percent contingency.
Two types of businesses
1.     1. Those that have experienced a lack of money.
2.     2. Those that will experience a lack of money.
According to the studies, nine times out of ten, a lack of money can be traced back to not having enough money from day one. I was in a position where I had to start profiting from my business not just by turning money over. This is very hard for a rookie like me. When starting a business there are so many possible pitfalls that can concern income that there really are no certainties. If you are starting a business, you will need to be sure that there are people who are prepared to buy your products. Although, it may take a while to establish your business and build it up to a level where you are covering overheads. When you are building the business, you will need to pay for all your fixed expenses and this goes back to the amount of money you have available when starting your business. When you buy a business that you think is working, you are buying a cash flow and a proven system. Sorry to say but there is no guarantee that it will also work for you.
Owning and working your own business is truly rewarding. It is definitely a lot more enjoyable if you can trim down your stress levels by having good financial planning and a realistic approach to how much money it will take to get you were you want to be. Be sure that if you start a business, have enough money for your business, this is important.
 
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