You are a new electrical contractor who just secured a $20,000 project. The materials will cost $5,000 and labor will cost $3,000, both of which you must pay this week. However, the customer will not pay the $20,000 invoice until the work is completed in 30 days. Because this project guarantees a $12,000 profit, you do not need to utilize working capital to take on this job.
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Electrician Business Operations
Running an Electrical Contracting Business Course
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After your electrical contracting business officially opens, the cash you must keep available to pay for near-term materials, payroll, and operating bills before customer payments arrive is known as ____ capital.
In the video, the contractor describes keeping $10,000 in the business bank account and treating that amount as 'zero.' Which of the following best explains why this approach helps a new electrical contracting business?
You are a new electrical contractor who just secured a $20,000 project. The materials will cost $5,000 and labor will cost $3,000, both of which you must pay this week. However, the customer will not pay the $20,000 invoice until the work is completed in 30 days. Because this project guarantees a $12,000 profit, you do not need to utilize working capital to take on this job.
Arrange the following sequence of events to demonstrate how a new electrical contractor can experience a severe cash shortage despite winning a highly profitable project.
As a new electrical contractor, you must critically assess different financial strategies to ensure your business survives its crucial first year. Match each contractor's capital management decision with the most accurate evaluation of its viability and risk.
You are building a complete pre-launch funding plan for your new electrical contracting business. You have identified the following one-time costs that must be paid before you can begin operating: work van ($15,000), tools and equipment ($8,000), contractor's license and insurance ($4,000), and initial marketing materials ($3,000). You also know from researching your local market that you will typically need to purchase materials and pay a helper's wages on each job one to four weeks before customers pay their invoices, so you want to keep at least $12,000 in available cash at all times after opening to cover those gaps. Which funding target should your plan specify as the minimum total amount to secure before launch day?