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’
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.