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How To Build An Emergency Fund In Your Business

Updated: Apr 16, 2024

Tell me, girlfriend, is your small business prepared and financially stable for if/when an emergency ever comes up? You know, if something crazy happens in the world like a pandemic hits and business slows down and you have to figure out how to pivot to still make an income? (Knock on wood!!) When things like this happen, a true emergency, having an emergency fund already saved in your business can help relieve the stress and burden when a crisis like this happens. An emergency fund will help keep things in your business running, while you have a little bit of leeway to spend time figuring out how to pivot and bring the business back in.


Having 3-6 months of business expenses saved can take you from feeling stressed and panicked, to being focused and working on growing your business.


If you don’t have an emergency fund yet, or want to know how to do it, keep reading!


business emergency fund

1. List Your Expenses


The first thing you will want to do is determine what expenses you have in your business on a monthly basis. If you pay for something yearly, break it down by month and factor that into your expenses as well. Make sure to account for things like:


  • any routine payments to keep the business running

  • salaries if you pay employees

  • any marketing/advertising expenses you are currently paying for and need to pay for

  • anything else that you routinely pay for


Once you make your list, add that total up for the entire month to determine your monthly expenses.


2. Determine how much you will save each month to fund it


The next step in creating your emergency fund for your business would be to determine how much you are going to save for your emergency fund, and how much per month you can save to build it up. For starters, do you want to save 3, 4, 5 or 6 months total in your emergency fund? Next, you need to figure out how much money you can put aside each month to get it funded. The best part about this step is that there is no “right” way to do. At least I don’t think there is. I think that you figure out what is comfortable for you.


You may decide that you want to save 4 months of expenses really quick, so then maybe you cut back on expenses, or paying some to yourself in order to save. Then, once you get to the 4 months, you still keep saving to get to 6 months, but you don’t have to save it as quickly. This is something for you to work out to what makes the most sense for you.



business emergency fund

3. Readjust and Replenish When Needed


The last thing you need to do when creating your emergency fund is to adjust it and replenish it when needed. Hopefully, you will not need to do this too often.


You may need to readjust your emergency fund if your expenses increase somehow. Maybe you choose to invest in a business coach, a monthly advertisement in a magazine, or whatever other expense you may incur. If these expenses arise and are a major increase in your monthly expenses, then you should adjust for that in your emergency fund. Especially if it is a long-term payment you will have.


If, for some reason, you need to dip into your emergency fund, then you will have to go back to step 2 and work on replenishing your emergency fund and getting it back to where you need it to be.


business emergency fund

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Talk to you soon, girlfriend!

Amy

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