Page 80 - The UnCaptive Agent

PREREQUISITES FOR SUCCESS 53

what you expect to pay represents either a positive or
negative number. That’s how much cash flow, one way
or the other, you will have.

Working Capital

If your budget shows a negative number for any month,
you will need working capital to make up the difference.
The formal definition of “Working Capital” is the differ-
ence between a company’s current assets and its current
liabilities. But for our purpose, working capital is the
amount of cash you need to tide you over periods when
your expenses exceed your cash income. You will need
enough working capital to cover your largest expected
monthly deficit (and I would add at least 25 percent to
that amount to be conservative) and enough to cover all
annualized negative cash flows (plus more for safety).
Add your first year’s working capital need from the
operating budget to your startup capital estimate. This
is how much money you will need to get your business
up, running, and through its first year of operations.
You should have this capital on hand or have a plan for
getting it before you open your doors.
There is an excellent budget template, in electronic
format, included in the Insurance Agency Growth &
Performance Standards book published by The National
Alliance Research Academy, which should be of help
in preparing your initial budget estimates.

Where Can You Find the Money?

When you add up the money you need to start your
business, it can be intimidating and discouraging. It is
probably more than you thought it would be! But take
heart, you are far from alone. Almost every founder faces