Cash Needs

When starting a business venture I have never seen an entrepreneur (including myself) estimate cash required for a venture any where close to what actually happened. The inherent optimism of being an entrepreneur automatically seems to dictate that cash needs will be underestimated. By the way, most venture capitalists, angel groups and private investors whom you generate interest to your venture know this. I have spoken with many investors and investor groups and they tell me they basically throw out the window whatever the entrepreneur projects for cash needed. The problem is that underestimating cash needs at the beginning of a business venture creates cash flow problems somewhere down the line. Because entrepreneurs always underestimate cash needs, the search for money needs to be consistent and continuous. However it is always wise to take the money you think you need and double it. It is also wise to have someone on your management team or better yet outside your management team who is good with numbers and forecasting challenge the entrepreneur’s projection of cash needs. I cannot over emphasize the need to overshoot your cash need projections otherwise you are almost certain to undershoot them. Even if your cash needs are conservative you still need to constantly look for more money. As I have said many times, since cash flow is the life blood of any business it is critical to make sure your cash supply is always right.