This presentation looks at two important aspects of finance for startups in the planning phase: Capital expenditure and Cashflow.

1. Startup finance and
funding - 1
Start your own business

2. Startup capital
 Capital expenditure
(CAPEX) = expenditure
outlay required to
launch the venture. To
make it fly.
 Working capital =
capital required to fund
the losses until breaks
even (covers its costs)

3. CAPEX
 “$ needed to get the
plane off the ground” -
Can be – tangible
(physical) or intangible
(non-physical)
 Tangible – vehicles,
equipment, computers,
shop fittings, leasehold
improvements, initial
stock.
 Intangible – statutory,
prepayments,
establishment, deposits.

4. Intangible CAPEX
 Statutory – architect,
council fees, professional
advice, business
formation costs.
 Prepayments – insurance,
rent in advance.
 Establishment – staff
(training, set-up time)
 Deposits – rent (1-6
months) – utilities.

5. CAPEX budget
Startup Pty Ltd
CAPEX budget
 List the capital
For the period leading to launch expenditure items
Item
Total Check
Amount Month 1 Month 2 Month 3 sum
required to launch your
Tangible
Equipment 10,000 10,000 -
business.
Fixtures and fittings
Construction
20,000
15,000 7,500
10,000
5,000
10,000
2,500
-
-
 Estimate the total
Total tangible 45,000 7,500 15,000 22,500 - expenditure required
Intangble
Statutory 5,000 2,500 2,500
-
-
(with assumptions)
Prepayments
Deposits
6,000
15,000
5,000
15,000
1,000 -
-
 Allocate the amounts
Establishment
Total intangible
2,500
28,500 22,500 2,500
2,500
3,500
-
-
over a monthly time
CAPEX budget 73,500 30,000 17,500 26,000 - frame (no specific date)
Assumptions:
 Check sum - validate
Detail here the assumptions that you have made in preparing the
figures.

6. Working Capital
 The forgotten funding
requirement
 Primary concern of
funders (investors,
banks)
 Experience tells -
“Twice as long, twice as
much, half the returns”
 “Crossing the breakeven
valley”

7. Breakeven valley
 Financial breakeven –
meets all its external
demands.
 Sustainable breakeven –
pays the owner a
replacement wage and
provides ROI 40%
 Equity breakeven –
repays capital invested
 You need to manage
your ‘cashflow’

8. “Cashflow
is more
important
than your
mother”

9. Cashflow overview
 Cashflow is your ability to
pay your bills as they
become payable ( or due)
 Cashflow = solvency.
 Corporations law – not
required to be
profitable, but must be
solvent. Directors can be
charged for insolvency.
 “Cash is king” for startups

10. Profit Vs Cashflow
 “The pursuit of profit can
send you broke”
 You can make a profit and
still not be able to pay
your bills.
 Prepayments (insurance)
 Debtors (payment terms)
 Stock (bulk discounts)
 GST (accrual accounting)
 CAPEX (unplanned)
 Cash to Cash cycle (delay)

11. Building your startup
• CAPEX – to make  Three distinct phases:
Infrastructure
the business fly
1. Build the infrastructure
2. Build the business
• Cashflow – to (customer benefit –
attract sufficient
Business customers customer acquisition)
3. Build the profit (owner
• Sustainability – benefit – management,
to deliver returns cost control)
Profit to stakeholders

12. Initial Cashflow budget
 Build it digitally –
Microsoft Excel
 Flexible and quick to build
 ‘What if’ scenarios
 Accuracy
 Timeline – min. from
launch to financial
breakeven
 Time period – monthly
 Detail your assumptions

13. Summary
• Prepare a CAPEX budget –
funds required to launch
your venture
• Prepare a Cashflow budget –
explains how you will fund
your venture until
breakeven.
• Include them both in the
financial planning section of
your business plan.