ChApter 7 | YOUR CASH FLOW FORECAST AND CAPITAL SPENDING PLAN | 125
know them. If a potential lender asks her
why she’s spending $3, 000 each for dress
racks, she can say, “The used ones from
the auctioneer are terminally rusty and the
discount ones are shoddy. I want my image
to be high quality, and this is the best
deal on good racks.” As the accompanying
example shows, Antoinette knows the
business she is about to open.
Although she doesn’t include an
itemized list of fixtures, office equipment,
and leasehold improvements in her
summary, she has detailed lists available.Capital Spending Plan:
Antoinette’s Dress Shopitem Amount
Fixtures in selling area include cash
registers, sewing machines, dress
racks (see list) $ 30,000
Leasehold improvements, bid from
Jones Construction includes signs,
lights, decorations 80,000
Rent deposit, two months’ rent 7,500
Opening inventory 30,000
Contingency 15,000
Total capital required to open $ 162,500For a second example, here’s a one-man
consulting firm’s opening cash needs. As
you can see, he plans to start with extra
cash; he has allocated $10,000 for working
capital.Capital Spending Plan: Jeffer’s
Associates Consultingitem Amount
Desk, conference tables, chairs $ 6,000
Fax machine 1,000
Computer system: PC, laser printer,
software 4,000
Copy machine 2,000
Typewriter 700
Telephone system 1,000
Misc. decorative accessories 500
Misc. deposits for utilities, business
license 2,000
Opening marketing and advertising 2,000
Supplies, stationery 1,000
Working capital estimate 10,000
Total capital required to open $ 30,200Prepare Your Cash Flow Forecast
Once you complete your capital spending
plan, you’ll know how much money you
need to open your doors. The next step is
to estimate how much additional money
you’ll need to survive the first lean months.
The basic process we’ll use to make
a Cash Flow Forecast is to start with
the monthly profit (or loss) figures you
developed in your Profit and Loss Forecast
in Chapter 6. You’ll then make adjustments
each month to the monthly profits to
account for the time differences in collecting
and spending money.