Whats Your Reserve

Writen by Donna Higton

What is your current reserve? How long could your business survive if the work dried up? How much work do you 'have to' take because you need the money? So many of us small businesses live with a reality of boom and bust – one month we are rolling in work, the next we have none…but we do have the money from last month, so we're ok…until the month of no work catches up with us!

Recognise this pattern? How many times have you thought 'I've cracked it!' only to have a lean spell shortly after?! We often then compound the problem by spending the money that we earn – either back into the business or on things we deserve because we work hard! For many of us, the money averages out so that our bills are covered and we have 'enough' to continue as a business. Which is great…but stressful. And if anything happens, panic can set in because there is no reserve.

When work comes in, we have to take it whether we want to or not, because we need the work and the money. While this is one way to build a business, it is not the only (or in my opinion the best) way. Of course, there are times when a client is too good to turn down, and when financial considerations mean you really must take what you can get. But do you want this to be the pattern of your business until the end of time?

No. This is where the reserve comes in. If you build a reserve, you do not 'have to' take work just because its there – you can make choices about how you spend your time. For example, I have had a call today from a temping agency I have previously worked for in lean times. Just a year ago, I would have had to take what they were offering, because I needed the money. Now, I can make a choice – of course a bit of extra money would be lovely, but I don't need to do it.

I have the financial reserve to keep my business going for another 3 months even if not one more client comes to me. So the temping contract is an option, but not something I 'have to' consider. And looking out of the window at the glorious weather, it is unlikely that I will take it! By contrast, this time last year I had NO reserve at all, and had to take whatever I could get. Let me tell you, it is a sweet feeling to be in this position.

For those of you who are looking at me askance, thinking 'no, I have 24 hours a day to be working, I'm going to work all of them!', let me ask you this – did you go into business so you could be bossed about by other people? Or did you do it so you could be your own boss, set your own schedule, do work you love and have some flexibility? While you don't have a reserve, you are still at the mercy of other people's choices.

So, how do you build a reserve? My advice is as quickly and efficiently as you can! The way I started was to put 10% of everything I earned in my savings account (only once, in a VERY lean month, I had to cut down to 5%, the rest of the time, I could manage without 10% of my income). I also got out of my overdraft and put a bit of a 'cushion' in my current accounts. By the way, this is not a short term strategy – it has taken almost a year to get to this point! Once I'd done that, I started paying everything I earn straight into my savings, and paying myself a 'wage' every month.

This wage is a minimum wage – I can live on it and I have a little extra for a bit of a life, but the idea is to build up my 3 month reserves to 6 months, then 12 months. This will give me some choices – and take away some of that 'self-employed panic'! So, where's your reserve? How long can your business survive if you have a poor few months, or an illness? This is not thinking negatively – it is thinking ahead positively, and could prove the difference that keeps your business growing.

DonnaOnTheBeach is a life purpose coach who is dedicated to helping people to tap into their joy and passion, and use it to make their world extraordinary. For more information, go to http://www.donnaonthebeach.co.uk