In this video the founder of MOBE, Matt Lloyd explains to one of the diamond consultant Dale Bundy that he keeps at least 6 months of reserve cash to run his own business and then he invests surplus money in other asset classes like real estate, stocks…etc..
Matt also gives the example of Bill Gates who used to keep at least 1 year of cash reserve for his business.
How Much Cash Should a Small Business Keep in Reserve?
Cash is the fuel that makes a business run. It is needed to pay salaries including your own, fund marketing programs to acquire and retain new customers, invest in equipment and facilities, pay rent, supplies and many more day-to-day activities.
If you’re an established business owner, look at your monthly cash flow report (or go to the next paragraph if you’re a start-up). This report will provide an historical and seasonal perspective. Note the cash received from sales and the cash spent. The net of these two is often referred to as the “net burn rate.” For example, if you have $50,000 in sales and $30,000 in expenses, then your net burn is +$20,000 read more at score.org
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