How To Allocate Capital (Money) when starting a Small Business

Most people think that capital means a large quantity of money. but it is wrong. everything you apply to start a new business can be considered as CAPITAL. That might be a building, vehicle, machines, human power, or goodwill.

but the most important capital type is Cash (Money).because money has high liquidity . in this session, you can learn about how to allocate money capital when starting a new business  Basically, we can identify five key arias to allocate cash capital 

Cash on hand

Allocating some considerable amount of cash (money) is a wise decision. cash has high liquidity. remember to keep at least 25% from the capital as banknotes at you.

because money requires to run your daily business operations like baying goods, pay utility bills, pay salaries. this is an important fact you should consider.   

Purchasing fixed assets

When starting a new business, certainly you have to purchase some fixed assets that need to run your business.

Then what are called fixed assets? fixed assets are the assets that are used for a long time. do you have any idea about fixed assets you have to purchase for your business?

Renovation 

You have to allocate some portion from the capital to apply as maintenance cost. think about the place you are going to locate the business, whether it might be an office room or store you have to remake it accordance with the requirement of your business.

For instance, imagine that you are going to start a clothing shop. you can not start your shop just because of purchasing a building. you have to prepare It suit to a clothing shop. that’s why allocating some money for maintenance is important.  

Mobile assets purchasing

What are the goods that you are going to sell on your business ?. that might be electronic items, books or grocery items, etc. no matter, you have to purchase them from a whole seller for sale in your business.

If you are doing a production-based business you have to purchase raw materials from another salesman to continue the production. In addition, you have to purchase types of equipment that have to use during little periods like Pens, light bulbs, printing papers, bill books, ink pads, etc.

You have to pay only a little amount of money to purchase those items, but you have to change them during a little period.

These things are work as wealth earning assets. therefore allocating a considerable amount of capital for purchasing such items becomes the most important part of capital managing.

Marketing

Marketing is an essential thing you must do. Ways of doing a marketing campaign for small businesses will be explained in another post. allocating a portion from the capital for marketing is a must.

Conclusion 

Then finally you should grab the following skills regarding the capital management of your business. 

  • Identifying the key arias you should empower from cash capital
  • Making a list of capital allocation 
  • Identifying Fixed assets and mobile assets you have to bay for your business
  • how to maintenance should go for your business

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