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104<br />
BUSINESS SKILLS<br />
recurring expenditures such as payments for material, rent for<br />
a workshop and the entrepreneur’s salary. It also depends on<br />
how the <strong>business</strong> develops in terms of income: sales may start<br />
slowly and income may be insufficient to cover all of those<br />
costs. However, as the <strong>business</strong> becomes better known and<br />
sales pick up, it should eventually reach the point where<br />
income is sufficient to cover all costs and the <strong>business</strong> starts<br />
generating profit. Entrepreneurs have to estimate their<br />
monthly recurring expenses and monthly sales to estimate<br />
working capital needs.<br />
Without sufficient working capital, a <strong>business</strong> risks running out<br />
of cash. If this happens, it can no longer pay the costs of<br />
running the <strong>business</strong> and it has to close down.<br />
Again, entrepreneurs should try to keep recurring costs as low<br />
as possible when starting a <strong>business</strong>. For example, they should<br />
refrain from employing unnecessary staff unless they are sure<br />
the staff are needed and they should keep material purchases<br />
as low as possible but sufficient to cover needs.