Assess the “seed capital” needs of the business project during the investigation process and start-up, and how these needs will be met.
The company will need seed capital of two and a half million dollars ($2.5) to start everything and keep operations till the business provides enough revenues to support and sustain itself. At the moment, however, the company has only raised $100,000 ($10,000 as an investment from all the founders and the rest from an expected grant from the local authorities who hope the business will ultimately improve the target customer’s financial health, literacy, and participation). The rest will be financed by potential investors, especially angel investors, and bank loans. The cash will be to build the business from the ground up and ensure it survives long enough to start being profitable.
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Estimate capital requirements for facilities, equipment and inventories.
From the initial seed capital, $250,000 is expected to be spent on contracting a service business company, who will be responsible for acquiring and maintaining facilities, equipment, customer service, employee insurance, and inventories. Some of the crucial facilities and equipment are the computer systems like server clusters and data banks to store, process transactions, and predict user trends for Business intelligence systems. Building the system on the cloud is a cheaper alternative. However, the cybersecurity risk requires inhouse handling of all data (highly sensitive and confidential). The contracted service business company will have to provide these and other services as part of their contract with Majesta.
Estimate working capital needs.
A significant amount of the investment capital will be spent on meeting the company’s short-term obligations, especially all accounts payable and the inventory (Sensini & Vazquez, 2021). An estimated working capital of $250,000 will be needed to purchase and maintain inventory, pay employees, pay for the marketing activities, network connectivity, maintain and upgrade the computer systems, and pay consultants and lawyers for any other services rendered. Note that all of these will be facilitated through the contracted company.
Estimate start-up capital needs until revenues are realized at full capacity.
The estimated timeline for the business is until December 2021 for the business to not only be sustainable, but also profitable. The company’s capital needs until this is achieved is estimated to be $1 million, without accounting for any external disruption, delays, and irregularities that would delay the implementation of the business plan.
Estimate contingency capital needs due to construction delays, technology malfunction, market access delays, etc.
Should anything go wrong, the plan’s risk management and mitigation strategy requires that half a million dollars be set as a contingency capital fund in case of construction delays, technology malfunction, market access delays, and changes in government regulations regarding the implementation of the business. Of all the risks, the most important and most likely to cause unpredicted delays are the cybersecurity threats. According to Jibril et al. (2020), cybersecurity threats is a significant risk, where businesses and start ups in the internet banking sector are primary targets worldwide.
Estimate other capital needs.
For sustained profits, half a million dollars ($500,000) will be required to fund an extensive marketing campaign to target different potential customers spread all over the Dominican Republic. Some of the capital will also be invested in creating and supporting existing infrastructure and researching on achieving several sustainable development goals. For instance, research will be conducted on reducing the power consumed when initiating and processing a single debit transaction.
References
Jibril, A. B., Kwarteng, M. A., Chovancova, M., & Denanyoh, R. (2020, March). Customers’ perception of cybersecurity threats toward e-banking adoption and retention: A conceptual study. In ICCWS 2020 15th International Conference on Cyber Warfare and Security (Vol. 270). Academic Conferences and publishing limited.
Sensini, L., & Vazquez, M. (2021). Effects of Working Capital Management on SME Profitability: Evidence from an emergent economy. International Journal of Business and Management , 16 (4), 85-95.
