Investment budget

When you buy machines or other fixed assets its easy to see that those are investments, but you also need to build up inventory (working capital), hire sales people that need to be trained (start-up costs) and rent an office. Actually all expenditures you do that are not covered by revenues should end up in the investment budget. Especially when you get a lot of orders, you need a lot of working capital, because you need to pay for the goods and you get paid months later. How you set up your investment budget depends on the nature of your business.

Before break-even the cost of capital is very high (usually ten times higher), so try to avoid unnecessary investments until you are profitable (i.e. cars, offices and management fees).

Below an example of a very simple investment budget:

*Only include costs as investment when they are not covered by revenues (initial loss)

**Include working capital as investment