Discussion
I know all small busines claim to live hand to mouth! But, I was wondering what kind of reserves other small businesses hold ( as say a % of typical annual profits) and how long you would expect those reserves to last you if work dried up completely tomorrow?
We end a major contract in April and have nothing else significant in the pipeline but we have built up reserves of about 12-18 months profits, but still feel a bit vulnerable.
Once you have answered I will go out and chase some new business!
We end a major contract in April and have nothing else significant in the pipeline but we have built up reserves of about 12-18 months profits, but still feel a bit vulnerable.
Once you have answered I will go out and chase some new business!
I can tell you what i'd like and that's to be able to run the business for 6 months without any income. The reality is I started in August and am working towards that as a target right now.
I'd be interested to hear what others do. I know of business's whom are hand to mouth and the cash flow for the month is vitally key to the payroll and bills in real time with no fat for any late or non payments. I personally feel that's a scary way to run but sometimes I appreciate there is no choice!!. The previous business I worked in was a little like this in the early days we had some interesting times, but we have good people around us and excellent payment collections systems.
ETA - not sure Xmas Eve of the Sunday before it is the best day to chase new business unless you sell last minute gifts
I'd be interested to hear what others do. I know of business's whom are hand to mouth and the cash flow for the month is vitally key to the payroll and bills in real time with no fat for any late or non payments. I personally feel that's a scary way to run but sometimes I appreciate there is no choice!!. The previous business I worked in was a little like this in the early days we had some interesting times, but we have good people around us and excellent payment collections systems.
ETA - not sure Xmas Eve of the Sunday before it is the best day to chase new business unless you sell last minute gifts
Edited by atom111 on Sunday 23 December 19:23
I guess there is no set rule as it really depends on the market you are in, as is the case above if you a developing products for manufactuer then the has to be reinvestment to stay on-top you can't really be building more reserves as that money will get a better return being invested in new or better product.
The reserve questions is interesting I don't think there is going to be a general % that works and it will be different for each business.
The reserve questions is interesting I don't think there is going to be a general % that works and it will be different for each business.
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