start up investment

OBJECTIVES

Entrepreneurship: Owning Your Future, 11th ed.Steve Mariotti

© 2010 Pearson Higher Education,Upper Saddle River, NJ 07458. • All Rights Reserved.

Describe start-up capital and explain how payback is calculated

Explain bootstrapping strategies

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Entrepreneurship: Owning Your Future, 11th ed.Steve Mariotti

© 2010 Pearson Higher Education,Upper Saddle River, NJ 07458. • All Rights Reserved.

Start-Up Investment

Start-up expenditures are those expenses associated with opening a new business.

Cash reserves are needed for an emergency fund and a reserve for fixed expenses. The emergency fund is the amount of money a business

should have available in the first three to six months for the emergencies that often arise when a company is just beginning.

Businesses establish a reserve to cover their fixed expenses for at least three months. The reserve for fixed expenses is maintained for the life of the business and is used if the company should experience a downturn in sales.

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Entrepreneurship: Owning Your Future, 11th ed.Steve Mariotti

© 2010 Pearson Higher Education,Upper Saddle River, NJ 07458. • All Rights Reserved.

Payback

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Payback is the amount of time, measured in months, that it takes a business to earn enough in profit to cover the start-up investment.

Entrepreneurship: Owning Your Future, 11th ed.Steve Mariotti

© 2010 Pearson Higher Education,Upper Saddle River, NJ 07458. • All Rights Reserved.

Bootstrapping

Many successful entrepreneurs began their businesses by

bootstrapping, or with very little borrowed money, through

such strategies as: Using personal savings Using credit cards

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