Lesson 4: Access to Capital

What You’ll Learn: The old adage that “it takes money to make money” is as true today as it was when JP Morgan was building his empire.  Whether its startup capital to get your idea off the ground or bridge funding to get you through slow times, money can be a make or break proposition for any business. We’ll walk you through some of the options and help point you in the right direction.

Access to Capital

“I made my money the old-fashioned way. I was very nice to a wealthy
relative right before he died.”

Malcolm Forbes


Great ideas take money. If you want to be the next Bill Boeing, you need a lot of money. And a really big garage to get your idea off the ground – literally.

But most businesses start small and build slowly. Incoming revenue balances nicely with expenses, and there’s a little left over for expansion and growth. Many legendary companies started out on a shoestring. Jeff Bezos started Amazon in his garage. His desk was a spare door. He and his wife couldn’t run the company’s server and vacuum at the same time without blowing a fuse.

As you start your business, give careful consideration to your financial resources as it is your pathway to growth and sustainability.

You’ve already done some of this work in Lesson 3: Business Model Canvas. For instance, the revenue streams in your canvas combined with your expenses become your cash flow – money in, money out.

Financial Basics

There is no standard formula for figuring out your startup costs. Every business is different. The mistake many first-time entrepreneurs make is not being honest about what these costs will be. Think long and hard about the costs you will incur to start your business.

Fixed costs refer to costs that remain constant:

  • Professional fees
  • Insurance
  • Rent/Overhead
  • Staffing and employment
  • Equipment and supplies
  • Interest paid on capital
  • Sales and marketing
  • Depreciation
  • Web site/Technology costs
  • Property taxes


Variable costs refer to costs that change as a result of the output:

  • Individual product cost (raw materials)
  • Packaging
  • Delivery
  • Contractors
  • Commissions
  • Income
  • Taxes
  • Credit card fees
  • Other operational costs

Your Instructor

Megan Hulsey is a Business Lender at Craft 3, a non-profit organization that makes loans to strengthen communities and small businesses. Megan is a leader in the regional entrepreneurial ecosystem with a broad network of business resources and partners that can help businesses achieve their potential. As a former business owner, she has experience in assisting companies in refining their business plans, crafting their marketing strategies, defining organizational culture and in coaching and scripting successful fundraising pitch decks.

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Cash Flow

Think in terms of monthly cash flow. In the beginning, more money will be going out than coming in. This is natural since you have more startup costs than customers. You want to run your projections out for at least 24 months and provide as much detail as possible, so you not only know how much money is supposed to go in and out, but where it is going.

When combined with your startup costs, these projections will give you an idea of how much cash you need to have on hand to take your business through its first two years. Obviously, you want to start moving into the black (i.e., you’re profitable) as quickly as possible, but you need to be honest with yourself and expect to run at a loss for some time. It’s easy to think that a friendly handshake in a meeting or a signed purchase order will turn into money in the bank. Remember, however, that the only number that counts is the balance in your bank account at the end of the day, week or month. Be conservative in your projections and spending. Question every expenditure before you approve it and don’t count a single cent until it shows up as a deposit.

Profit & Loss (P&L)

As noted above, cash will come in and go out. The Profit & Loss Statement expresses this in monthly terms for the first two years you’re in business. The formula is expressed as: Revenue – Expenses = Profit or (Loss).

Balance Sheet

The Balance Sheet should also cover Year 1 and Year 2. A Balance Sheet shows you the big picture of your business’ health and is expressed like this: Assets – Liabilities = Net Worth or (Equity)

The good thing is that these days there are lots of resources online to do all these calculations and planning. Our SizeUp tool is an excellent place to start. You can enter your projections and see what other businesses in your area or state report as their averages. This can help you develop your two-year projections for cash flow, profit & loss and your balance sheet.

Now, to answer the big question: Where do you get the money to either open a business or expand it?

Bookkeeping & Record Keeping

If you set up a bookkeeping system, and you should, these things take care of themselves. For the do-it-yourself crowd, a program like QuickBooks will do the trick. If you want some online options, Freshbooks has a wonderful invoicing system and GoDaddy has an online bookkeeping system that ties in your credit cards and bank accounts so you can manage all of your account categories, view trends and manage your paperwork in a single interface. You may want to hire a bookkeeper too, to do your annual tax filings. This is a snap, since QuickBooks and GoDaddy organize all your records to parallel IRS filing requirements.