The first requisite of business success is sufficient capital to carry on the business when it is established. The amount of working capital that will be required depends so much on many different conditions that no set amount can be stated as necessary, although the statement can safely be made that it is not likely that too much capital will be invested. It is not likely that expenses will be more than paid the first year, while, on the other hand, considerable money will be invested in furniture and fixtures, tools and apparatus, stock and other expenses, so that more than the amount necessary to run a moderate business for one year without returns would be advisable.

If the contractor is successful in securing paying contracts during the first year, and is energetic in following up and collecting outstanding accounts, a smaller working capital can be made to answer than when conditions are reversed. Again, the distance away from supply houses will have an important bearing on the amount of capital required. In the large cities, where supplies are convenient and but little money need be tied up in stock, most of the cash is clean working capital. On the other hand, when located some distance away from the base of supplies, after the regular stock has been purchased sufficient cash should still remain to defray all operating expenses for one year and leave besides a working fund to defray the cost of labor and materials for any contracts that might be signed.

As a basis for estimating, however, it might be stated that a cash capital of 10 per cent. of the yearly volume of work that will be done should prove sufficient after the first year is over and business actually being transacted. For instance, if the yearly volume of work amounts to $20,000, $2,000 working capital would be sufficient for a careful business man, although a greater amount would be desirable. The young contractor should be warned against the error of contracting for more work than he has capital to install. More young contractors fail for this reason than for any other. Never sign contracts for a greater amount of work than your ready working capital is 10 per cent. of unless the work is of such a nature that it, or some of it, can be turned over quickly, inside of thirty or sixty days, and payment secured, thus completing the contract. As work ordinarily runs, however, more or less capital is tied up in each operation in the form of materials and labor, and if too many operations are under way at once there will be no working capital left with which to pay for labor and the current monthly accounts.