This is Part 2 in a 5 Part Series. Read Part 1.
2. Insufficient Capital:
The most common fatal mistake for failed businesses is the owner runs out of money. The more money you have into the business the more likely you are to work harder to make the business a success. It is also an indication of how much you have at risk should the business fail. A strong capital position increases your ability to grow and weather slowdowns in your business.
It usually takes a business about two to three years until your business starts to see a profit. That means you need enough cash to cover all costs until sales can eventually pay for these costs.
Remember, when you’re first starting out and approaching a bank for financing, the bank will require about 30-40% cash down from the borrower.
Amy Mazigian is branch manager at U.S. Bank Bismarck North.