[Entrep] finals

• Avenues for finding Starting Capital

  • Personal Savings
  • Utilizing under utilized assets
  • Money rounds
  • Maximizing benefits from suppliers
  • Family, Friends and others
  • Business Angels
  • Money Lenders
  • Financial Institutions
  • Government Programs
• Finding Start up Capital: The 6 Principles of Action

  • Bootstrapping
  • Raise funds from the right sources
  • Make progress while you wait
  • Be sure that the money hatches money
  • Pay yourself a salary and use the profits for re-investment
  • Take feedback
• Bootstrapping


  Exploiting possibilities to raise funds without external investment
• Evaluating Starting Capital Options

  1. The Risk / Return Trade-Off

  2. Capital budgeting (NPV, ROI)
• Risk / Return Trade-Off


  Potential return rises with an increase in risk
• Capital Budgeting


  Planning process used to determine whether a firm's long term investment is worth pursuing
• Net Present Value (NPV)


  Difference between the present values of cash inflows and outflows, used to analyze profitability
• Return on Investment (ROI)


  Measure of cash (or potential cash) generated by an investment, or the cash lost due to the investment
• ROI = (PROFIT / INVESTMENT) x 100
• Acquiring sufficient starting capital is important to set-up a viable business
• Evaluating sources of capital is critical to make good decisions
• The purpose of the session was to identify different sources for starting capital, evaluate different sources of capital, and prepare an overview of capital needed and sources of capital
• The session used boot-strapping methods of capital seeking and evaluated sources of capital according to NPV and ROI
• The session prepared an overview of necessary capital and acquired sources of capital
• Working capital


  All current assets that can be used to meet the day to day obligations of a business
• Net working capital


  The difference between an organization's current assets and its current liabilities
• Managing working capital


  Deciding on current assets and current liabilities
• Working capital cycle


  • A never-ending cycle of activities and events involving cash, debtors, inventories, and creditors
• Time and money


  Crucial in the working capital cycle, linked to the cash operating cycle
• Profitability


  The situation in which a company, product, etc. is producing a profit
• Liquidity


  The state of having enough money or assets to pay any money that is owed
• Components of working capital

  • Current assets: Debtors, Stock, Cash

  Current liabilities: Creditors
• Purpose of managing debtors


  Obtain payment from customers as fast as possible, improve cash flows, minimize bad debts
• Measures to manage debtors


  • Cash discount system, obtain upfront deposits, strict credit checks, credit control procedures
• Reasons why businesses fail to collect money from debtors
• Debtors' collection period


  Average length of time required to collect debtors, lower is more efficient
• Purpose of managing payables (creditors)

  Negotiate longer credit periods to pay business expenses
• Measures to manage creditors


  • Record all credit purchases, monitor due dates, pay as agreed
• Creditors' payment period


  Average length of time required to pay creditors, longer is desirable
• Purpose of inventory management

  Ensure optimal stock levels for uninterrupted production, reduce investment, minimize reordering costs
• Ways of inventory management


  • Stock counts, review stock turnover, sell off slow movers, ensure storage security
• Stock turnover period


  Average number of days stock is held before sale, shorter is better
• Factors determining optimum stock levels


  • Projected sales, raw material availability, supplier lead times, slow movers, market factors
• Purpose of managing cash

  Cash is the oxygen that enables a business to survive and prosper, primary indicator of business health
• Measures for good cash management

  • Knowing cash needs, maintaining good relationships with bankers and creditors
• Cash management exercise


  • David the paper cups distributor
• Tender


  A formal request for bids to supply goods or services
• David won a tender to supply paper cups to Bat Valley Primary School but will be paid 120 days after delivery
• David's actions


  1. Calls supplier Namukasa Musoke

  2. Orders paper cups to fulfill the tender
• Cash management


  Managing the flow of cash in and out of a business