Why Every Business Owner Needs a Cash Runway

As business owners, it’s easy to focus on paying others and reinvesting into growth, but don’t forget to pay yourself first. Your financial health is as important as your business’s growth. Prioritize setting aside a portion of your income for yourself while also building a cash runway—a safety net to cover 3-6 months of business expenses in case of downturns. This allows flexibility to react and make strategic moves without panic.

A cash runway can be savings in a bank account, access to available credit on a credit card, or access to a line of credit. As your business grows, you will need to prepare for the unexpected. Having a cash runway buys you the luxury of time to react, shift the direction and try new ideas to fix the problems you have encountered. According to SCORE, 82% of small businesses fail due to cash flow problems.

I think of a cash cushion also as an opportunity to fund to capture new growth, buy another business, invest in a new revenue stream creation, get a discount for paying in full, hire an ideal candidate ahead of schedule, etc. We want to be prepared when opportunity presents itself and have a way to capture it when it happens.

Why is a Cash Runway Important?

1. Financial Security: A cash reserve provides a safety net during unexpected downturns or slow seasons, allowing you to cover operational costs without stress. Whether it's a temporary decline in client referrals or unforeseen expenses, having funds set aside ensures that your business can weather these storms without jeopardizing your financial stability.

2. Informed Decision-Making: With a cushion in place, you can make thoughtful decisions about growth, hiring, or investments without the pressure of immediate financial strain. When you’re not constantly worried about cash flow, you can take calculated risks, explore new opportunities, and expand your services, knowing you have a financial buffer to rely on.

3. Peace of Mind: Knowing you have funds available reduces anxiety and allows you to focus on serving your clients and achieving your business goals. A solid cash runway gives you the freedom to innovate, invest in your professional development, and ultimately create a more fulfilling work environment.

Building Your Cash Runway

Now is the perfect time to assess your financial position and start building your cash runway. Consider setting aside a percentage of your monthly profits to gradually establish this fund. Aim for 3-6 months' worth of operating expenses as your target. If you are not yet profitable, that is the first order of business.

If you’re ready to establish this vital fund and ensure your business's health, I invite you to schedule a Q&A call with me.

Schedule Your Q&A

Let’s work together to secure your financial future and ensure your business continues to thrive!

Q&A Call

Make sure to check out our new website at www.wealthworthwithin.com. We have blog posts, videos and podcast interviews that will help you improve your financial literacy in business.

Best,

Carla Titus Founder & CEO

Wealth and Worth Within

Get the inside scoop delivered straight to your inbox! Join our mailing list and stay in the know—don’t miss a thing! ??

Follow us on social media!

We are always posting new content and financial tips for business owners who want to improve their business profitability LinkedIn, Facebook, Instagram