- 1). Prepare cash-flow projections for your business. If you have experience owning and operating this type of business, base your sales projections on your previous experience. If you do not have sufficient business experience to confidently make sales projections, seek the counsel of more experienced entrepreneurs through trade organizations and by networking with other operators within your industry. Carefully calculate the amount of money you will need to operate your business, including the cost of supplies and materials, as well as labor and overhead expenses such as rent and utilities. Include your personal expenses in order to avoid accruing personal debt to finance your business. Plan on expanding your business operations only when you have sufficient capital to do so without borrowing money.
- 2). Plan for periods when your cash flow projections indicate that you may expect a shortfall. Set goals for setting aside money during busy periods to get you through the slower times. Schedule inventory purchases to coincide with times of the month or the year when you will be able to recoup cash outlays within the periods that vendors allot you in their payment terms. Purchase extra inventory when you have the cash on hand or when you can negotiate advantageous prices by buying in bulk, but avoid spending so much on inventory that you leave yourself without sufficient operating capital.
- 3). Use your credit card or line of credit only when you are certain that you will be able to quickly pay back the amount your borrow. For example, if you own a catering company and you negotiate a contract to cater a wedding for two hundred people, use your sources of available credit to purchase materials and then pay off your balance as soon as your client pays you. Prioritize payments to creditors over other types of payments, especially discretionary purchases such as new equipment that isn't absolutely essential to your business operations.
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