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Consumer Warnings

The Better Business Bulletin

Don't Make A Captial Mistake!

by Ben Armacost

In my home state of Maryland there is a beautiful house on Falls Road. Well, at least it would have been a beautiful house if it were completed. For as long as I can remember, the unfinished stone walls have been standing there silently. It seems that a man had started the project long ago, but ran out of money and never got back to the task. Quite sad indeed, for it would have made a lovely home if only he had planned more carefully.

The Sydney Opera House is a completed structure, and one of the architectural wonders of the world. But it, too, is the product of gross forecasting errors. The initial cost was estimated at $7 million in the mid-1950s, but in the end cost a whopping $102 million!

Have you noticed that nearly every project–whether you're renovating your kitchen or watching a major highway being constructed downtown–costs more in the end than predicted? Businesses of all sizes need to plan carefully so they have enough capital to get up and running smoothly without the embarrassment of running out of money due to poor planning..

Your business needs 3 types of capital in order to ensure it will work:

• Overhead Capital. These are one-time expenses that include not only equipment and property, but also licensing fees, inventory, signage, and deposits.
• Working Capital. This is everything you need to keep your business running. This includes paying back loans, both principal and interest!
• Reserve Capital. This is money set aside for unexpected expenses as well as mistakes in planning. Yes, we all make them mistakes, so don't get caught by not having some reserve cash.

Don't make the mistake of forecasting too low. Plan enough capital in the beginning so you don't have to beg, borrow or steal later–or worse yet, let your business fold in shame.

Jesus warned that we should plan carefully first before plunging into any endeavour: "For which of you, desiring to build a tower, does not first sit down and count the cost, whether he has enough to complete it? Otherwise, when he has laid a foundation, and is not able to finish, all who see it begin to mock him, saying, ‘This man began to build, and was not able to finish.' " Luke 14.28-30 (RSV)

Keep up the good work!

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