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Written by Bill Petty A NOTE ON FORECASTING FINANCIAL REQUIREMENTS If we were to ask owners of small businesses to identify their most pressing problem the answers would be varied Responses might include finding and retaining qualified employees meeting the increasing cost of employee health care and managing change Also any time this question is asked the difficulty of acquiring the needed financing is invariably cited as a critical problem As noted by one entrepreneur The biggest problem facing small business as I see it is money where to get it how to get it and where to get enough when you need it 1 Regardless of whether we consider financing to be the most pressing problem most would agree that it is an issue that we can ill afford to ignore or even slight The problem is most pressing for new company startups and those firms that are experiencing growth FINANCING THE VENTURE THE BASIC QUESTIONS While the acquisition of financing may seem intimidating it need not be It does require us to think carefully about the cash outflows needed to undertake a venture and where we might find the money to fund these cash expenditures Effectiveness in such an analysis is largely dependent on developing a good understanding of the business complemented with some common sense In raising capital there are some basic questions or issues that must be addressed prior to actually soliciting the funds The three issues which we will look at here are as follows 1 2 3 1 2 Forecasting a new company s profits and for a new firm determining when it will achieve a break even point in terms of profits 2 Understanding the nature of the asset and financing requirements for a new firm Estimating the amount and basic type of the assets needed and financing required for the new venture What is the Most Pressing Concern for Small Business Today Small Business Forum Vol 10 No 1 Spring 1992 p 86 The article provides the answers given by ten business owners to this question Another question that we



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