INNOVATION IN BUSINESS ENTREPRENEURSHIP MANUAL

MANUAL INNOVACIÓN EN EL EMPRENDIMIENTO EMPRESARIAL

4. FINANCING A PROJECT ENTREPRENEURS

Entrepreneurship and Financing are two different concepts. We have already discussed in previous chapters how entrepreneurship involves the firm and determined will to design and deliver a value proposition to satisfy needs and wants in a different (better) way than the current offer and for which our target audiences are willing to pay. Such a project could be financed with the founding partners' own resources and therefore not require external financing, in this sense we say that entrepreneurship and financing are different concepts. We could say in this sense that: • There is no better funding than that which is "not needed". • There is no better financing than that derived from the sale (and collection) of customers. In the case of needing financing, there are some critical points that need to be taken into account: a) The importance of a good Financial Plan within the Business Plan: It is of paramount importance to have a good Financial Plan within the Business Plan. Business Plan specifying the Preliminary Profit and Loss Account, the Balance Sheet Pension and Cash Account (cash requirements) for at least the first three years. In this Financial Plan and as a start-up balance sheet for the year, the Investment Plan (what assets, including cash, are needed to start up the business) and the Financing Plan (how the assets considered necessary to start up the business will be financed) will have been specified first. b) The financing needs are conditioned by the initial Investment Plan that we consider necessary to start up the business: The objective of a business is not to have a "large balance sheet", the objective of any business is to make money. Therefore, what conditions the financing needs are the investment needs that we have previously specified. We must try to start up projects that are not very capital-intensive, otherwise "someone" will have to finance them, with their own funds and/or external funds.

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European Open Business School