Ways of Calculating Capital to Start a Business

Ways of Calculating capital to start a business - Often we ask people who have opened businesses: “How does the capital you need first when you open a business that now?”. Answers that often arises is: “… several million dollars, or a few dozen million dollars ….” right right? Principally, there are numbers that come out. But, if you are asked like that, not necessarily you can answer. Because usually when we want to run a business, many of us who do not know how to calculate it.

Well, this time I will share a secret with you about how to calculate the amount of capital you need if you want to Start a business. In principle, in running the business, there are only 3 types of capital you’ll spend:

1. First Capital Investment
2. Working Capital
3. Operating Capital

Let’s discuss it one by one.

1. INITIAL CAPITAL INVESTMENT
What is the initial investment capital? This is the kind of capital should you spend in the beginning, and is usually used for long-term. Examples of this capital is the building, equipment such as computers, vehicles, office furniture and other goods used for the long term.

If your business businesses repair shop, then your initial investment capital is the building, workshop tools, and other furnishings that are needed in the workshop. If your business stores, then your initial investment capital is a shelf, table, maybe even the cash register. Usually, this capital value is large enough as it is used for long-term. But the value of the Capital Investment will shrink from year to year even from month to month.

2. WORKING CAPITAL
It is capital that you need to spend to buy or make your merchandise. This working capital may be issued every month, or any future orders.

For example, if your business enterprise where to eat, then the working capital you need is capital to buy groceries. If your business development efforts made craft goods, then your working capital is the money you spend to buy raw materials. If your business is photocopying services, working capital yes you the money you spend to buy paper, ink, and so forth. In principle, no working capital, you will not be able to complete your order or do not have the merchandise. Later, you might even not be able buyer because the goods are not there. That is the importance of working capital.

3. OPERATING CAPITAL
The last capital operating capital. Operating capital is capital that you need to spend to pay the monthly operating costs of your business. For example payment of salaries, monthly phone bills, electricity, water, even retribution.

Related: How To Start Online Business

The posts in this capital in all business operations are generally quite similar. This is because, in principle, which is defined as operating capital is money that should you spend to pay for items outside of your business expenses directly. So, Capital Operations are usually paid on a monthly basis.

Well, how do you Mom? Easy, right? Now, you can calculate your own, do not you, should you spend capital to start a business.