Pitfalls in Financial Planning of Start-ups

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Pitfalls in Financial Planning of Start-ups
Paula Kokare, Project Manager, Switzerland, Premium Member
Poor financial management and planning during the initial stages of start-ups' operations may cause underperformance or even failure. Dunn and Cheatham (1993) identified several factors, which are characteristic to overall poor financial planning by small and start-up businesses along their development stages:
  1. LACK OF INITIAL FINANCIAL RESOURCES: Many entrepreneurs fail to match maturities (durations) of long-term investments in assets to appropriate long-term sources of financing. Similarly, the need for long-term investments to finance basic current assets and inventories is often underestimated by new ventures.
  2. LACK OF SURVIVAL CASH: Entrepreneurs tend to raise just enough cash to open up the business and start the operations. They do not necessarily take into account foreseeable cash requirements from the business by anticipating future events.
  3. FAILURE TO ANTICIPATE GROWTH: Due to optimistic attitude of entrepreneurs, business growth is seen as ne...Register



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