The new business (or branch office
within a franchise), seeks to gain market
share while minimizing negative cash outlays
in growth stages. During the first year of
operation, most new offices are faced with
high fixed expenses, delayed cash flows, and
substantial start up expenses. Cash reserves
become a critical consideration as fixed and
variable expenses often exceed gross income.
The prudent entrepreneur should plan for
income delays due to (a) time lags between
deals written and deals closed that can
often exceed a few months, and (b) time lags
in sales production from hiring to actual
production and receipt of commission income
from new salespeople.
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