Would-be entrepreneurs tend to make certain common mistakes when starting a new enterprise.

Chief among these mistakes is the failure to properly plan finances, especially cash flow. Such a failure is the epitome of the statement, "Failure to plan is a plan to fail." It has been said that in entrepreneurship the definition of happiness is "positive cash flow." Companies die for one reason - they run out of cash.

There may be millions of possible reasons they run out of cash: incompetence, malfeasance, bad idea, legal problems, lack of sales and so forth. But in the end, a company dies for lack of cash to meet its obligations.

After all, cash is the lifeblood of a company. Cash courses through the arteries and veins of a company just as blood does through the body. Hemorrhage blood without stopping the loss, and the body dies. It is the same for a company. Hemorrhage cash long enough, and the company dies.

Accordingly, cash flow planning becomes critical. Yet many entrepreneur wannabes simply fail to properly plan cash flow.

Cynics do not believe that startup companies can accurately predict the revenues of a company. They often think the projections found in most business plans are pie-in-the-sky prognostications meant to impress investors into plunking down a wad of cash. However, sophisticated investors and entrepreneurs know there is a better way.

The kind of entrepreneurs that sophisticated investors like to back are those who have industrial-strength integrated financial projections - in other words, a Microsoft Excel (entrepreneurs should not use any other spreadsheet software because no one will be able to access it) workbook containing month-by-month projections for the three core financial statements: balance sheet, income statement (a k a profit and loss) and cash flow.

Each of these would be a separate tabbed worksheet in the workbook with supporting worksheets following. The worksheets are integrated, meaning they refer to one another and feed the three core financial statements.

Such a workbook becomes the central nervous system of the new enterprise's business planning. Ideally, it is tied to the general ledger in QuickBooks. Ultimately, the entrepreneur is able to research massive what-if scenarios, always keeping an eye on each iteration's impact on cash flow.

The process of creating the workbook forces the entrepreneur to consider myriad business issues that he or she might have never otherwise contemplated. This alone makes the process worthwhile. However, one of its most important outputs is arriving at the all-important j-curve. Every new business experiences a j-curve, during which there is an initial cash flow deficit that eventually (hopefully) becomes a cash flow surplus and the company becomes customer-funded instead of investor-funded.

The low point on this curve is the amount of cash an entrepreneur will need to raise to have enough cash per its plan. The smart entrepreneur adds a 20 percent to 50 percent buffer to this number in case Murphy and his laws show up with unplanned problems.

If you know the amount of cash required to run the business per the plan, then you truly know how much money to raise from investors. Sadly, many entrepreneurs are never able to convey rationally how much they truly need to raise or why.

Creating an integrated financial projections workbook is the science behind knowing instead of guessing. There is nothing warmer and fuzzier to a sophisticated investor than to take an entrepreneur's financial projections and try to poke holes in the financial plan only to find the reasoning sound. Then, the entrepreneur will find capital easier to raise.

If I were starting a company today, I would complete a bona fide integrated financial projections workbook before spending significant time and money on product development, hiring people and even forming the corporate entities.

After all, if the opportunity is a financial stinker, why waste the time and effort?