Whether you want to open a bookstore in Texas or launch a Web design company in Oregon, it’s possible to see exactly how existing companies have done it and truly plan for business in the real world. Here are a few principles to consider when planning your startup’s finances:

• Prepare a Cash Flow Statement. Before you start investing in or operating your business, prepare a detailed, monthly cash flow statement for the first months. The first step is to anticipate all expenses you will incur prior to receiving any revenue (month zero). Then list anticipated revenues and expenses for each month; this will determine your monthly cash flow. Anticipate negative cash flow for at least the first six months, since expenses generally precede revenues in a startup situation. Both SCORE and the SBA have cash flow templates available as part of their business planning tool. This analysis will indicate how much startup cash you will need, and the additional cash required to cover operating losses during the early stages of the business.

• Prepare a Sensitivity Analysis. The one thing I can assure you about your cash flow projections is that they will be wrong. What we don’t know is how wrong and in which direction. So once you have prepared your “best estimate” cash flow projection, do some sensitivity analysis. What happens if revenues are 20% below expectations? How about 20% above? What if cost estimates are understated by 20%? If you are buying inventory to support future sales, underestimating sales volume can be just as dangerous as overestimating it.

• Heed Expert Advice. Even the best financial forecasting and fiscal planning don’t guarantee success in business–because those critical markers of the startup experience don’t account for the impact of realistic expectations for how much time and energy a new business requires and other sometimes-surprising aspects of entrepreneurship.

Once you have completed the above steps, you will have a reasonable understanding of your business’ cash requirements under a variety of circumstances. You will know how much cash you need to get started, and when you might require additional cash infusions to cover early operating losses or inventory buildups. You can then make that all important decision: go or no go.