Once you have formed your company and have obtained your business permits, licenses and insurance, you are going to need to calculate the amount of capital or money you will need in the bank to fund your start up costs. Your goal is to have enough money in a checking account to fund start-up costs until profits can take over. Think of it this way. If you were traveling across the desert and the next gas station was 300 miles away it would be foolish to leave with your tank on empty.
Planning ahead can prevent you from making mistakes in funding that can lead to devastating results for your company. Nothing is worse that running out of money just when things begin to take off.
IDENTIFYING YOUR CAPITAL NEEDS
You will first need to identify all potential start-up costs or at least all the major ones. Some of these will be one-time or single occurrence costs such as equipment acquisition, legal fees, deposits, permits, down payments and licenses, etc.. These are generally non recurring costs and only need to be funded once. Other costs will be ongoing such as the price of utilities, inventory, accounting fees, office expenses etc.. These expenses will be recurring and will initially need to be paid from start-up capital until the business is profitable on a cash basis and can support these expenses on its own. (produces more cash than it consumes)
The good news is that after purchasing equipment, power washing companies have a modest need for working capital. Water is almost free and the only other commodities that you need are detergent and gasoline. For the most part, after your equipment is purchased, you will just need enough money in the bank to cover your basic office expenses until you turn profitable.
In summary, I would suggest you make a list of your equipment and initial supplies similar to the following one.
- Enclosed Trailer – $2,500
- Power Washing Machine – $3,000
- Detergent and Chemicals – $300
- Blowers, Brooms, Etc. – $300
- Basic Office Furniture – $500
- and so on….. Keep in mind these are just examples.
You would then add a few months of operational bills and some capital to pay workers until you get paid for a job. Put together the funds necessary to cover all of these expenses and deposit them into your commercial bank account. Remember, this money is for your business and not for you to live on. You should have money for that somewhere else.