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Monday, March 2, 2009

Caveman Capital


That portion of the produce of industry, which may be directly employed either to support human beings or to assist in production.


Photo Credit: The University of California at Irvine

The idea of capital started with primitive man. One day Krog the caveman decided to keep one of the brontosaurus bones he had after eating his fill of brontosaurus and Voila, capital was created. Now Krog has something he can employ to help him produce more food, probably by bashing it over the head. (Yes, yes, I know. No human ever met a brontosaurus, I know, I know. But if we can suspend our disbelief enough to enjoy watching Fred and Wilma order a bronto-burger, we can also suspend our disbelief enough to let Krog have a brontosaurus bone!)

We've come a long way since Krog and his brontosaurus bone. Today most of us think of capital as money invested into some sort of company, but the notion of capital is still the same: something which was produced earlier (money) is employed to assist in the production of whatever it is that the company does. If you want to get into the nitty gritty, capital is more than just the money, it's anything tangible used to create goods or services that is not itself consumed in the production process. But since money is our unit of exchange, and since money can get you any of the capital goods you need, let's just keep our definition simple.

But if capital comes from what a company produces, what are you to do if you're trying to start-up a company that doesn't yet produce anything? How do you get your company to produce capital for future use if you don't have any capital to begin producing anything? Well, of course the answer is that the capital comes from someone or some place else. Banks or investors will give you the capital you need to start your company, provided that you promise to pay them back and indeed have a way to pay them back. Anyone can promse to provide a return on capital, but not everyone has thought through exactly how they will accomplish this. That's where a business plan comes in.

A business plan is nothing more than a detailed thought process on how you are going to pay back anyone who gives you money. It's that simple. Well, it should be that simple.

The problem is that these days banks and investors want very specific things in your business plan. Business models, marketing plans and financial pro-formas are all necesary components of business plans, but sometimes even that isn't enough. Though you can always interatively piece together a rock-solid business plan through various encounters with banks and investors, it is obviously much better to have an awesome first impression; people are willing to let go of money much more readily if they feel you've done your homework and came prepared the first time.

So do your homework! Find and use all the resources that can help you make your business plan rock solid the first time. The SBA has several experts who will help point you in the right direction. Call them and use them, they're totally free! They won't write the business plan for you, but honestly, you'd be silly not to call them. If, however, you want someone to do all the research and write that stellar business plan for you, give us a call. Small businesses are our passion, and we believe that our business is growing your business.

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