Undercapitalization, or lack of sufficient operating capital, simply means the money has run out. The concept is simple, but the root causes of undercapitalization are more complex. Knowing the factors that lead to it can help you prevent them.

Here are some tips on avoiding undercapitalization of your business.

1. Choose an industry you know. Do not rush into a business in which you have little or no experience. Lack of experience can lead to underestimating how much capital it takes to keep the business afloat, which can spell disaster for your new venture.

2. Have a thorough business plan. Your business plan will inform potential investors and lenders about your business and (hopefully) entice them to invest. But it should also serve as a roadmap for starting and running your business. If your business plan is thorough, you will know if your business is viable and whether you can afford to fund it during the startup stage and beyond. Set realistic goals, taking into account worst-case scenarios and planning for these eventualities. See the AllBusiness.com Business Plans center for more information.