-*Savings or better put reserve capital*-
Exactly!!! These are two totally different funds!!
Reserve Capitol is what you need to have put away prior to starting a business. This fund is to carry you through the emergencies and slow times in order to keep your business alive for an extended period of time or hardships. Most lending institutes will look for this in your business plan before loaning any substantial amount of money for equipment or inventory. Most commonly known as "Operating Capitol".
A savings fund is established from the profits made after expenses have been met. This should be a personal fund for yourself for retirement or other personal goals that you have set. If you go through your operating capitol and then began tapping into your personal savings, you are simply investing your personal funds into a failing business. Time to step back and reevaluate if this is the best place for YOUR money.
Everyone wants to be a business owner, be their own Boss, keep 100% of the profits for themselves, but...How many are financially prepared to do this? How many really have a true idea of what can happen in a heartbeat that can turn their hopes and dreams upside down.
Why are we required to have insurance, not only on our vehicles, but on the freight we carry, and even on ourselves. (W/C insurance) Why ??? Because Sh*t happens!! and when it does it can be quite costly. Without some type of coverage it could be desecrating to ourselves and even our carrier. So they make it mandatory for us to protect ourselves and them.
Operating Capitol is no more than an insurance policy, without it you are treading dangerous territory. No it's not mandatory, but it is a smart plan if you plan to be in business for the long haul and be successful.
Nuff said,
Danny
