2. Assess the total investment cost early on“It will only cost £10k to create the website and then we will be up and running”. How often have we heard that” As an attempt at a first-year cashflow forecast this is dangerous stuff.
Entrepreneurs almost always underestimate the total cost of getting a business to cash breakeven. Perhaps that is a blessing in disguise; knowing the real cost would probably put most people off. Ask yourself whether 2012 would have happened if a cost of £9.6bn had been mentioned
However, finding out that you have run out of cash halfway through year one is not a great way to manage things; and yes, in some cases it would have been better if you had never started. Being diluted by through a last minute second-round investment, having to compromise the business model because you can’t afford to build it properly, having heartrending arguments with your business partner or your other half at home creates terrible damage and loss of value. Spend some money with good advisers, even if you are short of it.
This is the second of six short pieces on working with your accountant, written by Christopher Jenkins, senior partner of Wingrave Yeats (yes, they’re accountants). Wingrave Yeats was voted Best Medium Sized Firm of the Year and Chris was voted Best Business Adviser of the Year by the CBI. Contact him at [email protected] or go to www.wingrave.co.uk
For more on choosing and using an accountant, click here for our Start-up Guide.
