<ul><li>Describe start-up capital and explain how payback is calculated </li></ul><ul><li>Explain bootstrapping strategies </li></ul>
Start-Up Investment <ul><li>Start-up expenditures are those expenses associated with opening a new business. </li></ul><ul><li>Cash reserves are needed for an emergency fund and a reserve for fixed expenses. </li></ul><ul><ul><li>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. </li></ul></ul><ul><ul><li>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. </li></ul></ul>
Payback 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.
Bootstrapping <ul><li>Many successful entrepreneurs began their businesses by </li></ul><ul><li>bootstrapping, or with very little borrowed money, through </li></ul><ul><li>such strategies as: </li></ul><ul><li>Using personal savings </li></ul><ul><li>Using credit cards </li></ul>
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