Working Capital & Personal Expenses when investing in a new business

Hi! In today's video, I'm going to talk about a very important topic for those willing to apply for an E2 Visa investing in a franchise business. Some people are prepared to spend the total estimated investment amount in a specific company, but sometimes they overlook other reserves they might need, like additional working capital or savings for personal expenses in the beginning. And that's what we will discuss today.

Almost every business will require some time to generate profit after starting its activities. During this period, the investor must be prepared to cover eventual losses and inject more money in the company until the financial break-even point be achieved.

One good thing about franchises is that other franchisees already have been through the same situation and they can open their numbers. In addition to that, franchises in the US when presenting the FDD (Franchise Disclosure Document) they contemplate the estimated working capital for at least the first 3 months of operation and that's part of the total estimated investment. In some cases, for more detailed projections it's also possible to have a business plan considering specifics details, and with that, the necessary working capital under different financial scenarios.

The necessary amount varies hugely based on several factors, like business concepts, franchisee role, number of employees, ongoing investments, and so on. In general terms, if the intention is to reduce the estimated working capital in a new business, in most cases we recommend business models with low overhead and minimum staff at the beginning, and with quick customer acquisition projection.

Regarding personal expenses, the necessary capital to cover them will depend on the family lifestyle and income sources. It will vary case by case, but usually having a spouse working in the business or perhaps somewhere else, often helps the overall family situation.

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