You know all about building an emergency fund for your personal expenses, but what about building an emergency fund for your business? Why would you want to build a business emergency fund?
What if something were to happen to you and you couldn't work in your business? Usually if you are working for an employer, you have paid days off and other ways to still get a paycheck. But most of the time in your own business, you don't get paid for taking days off. If you can't work then you can't make money.
Or what about those times when you don't make much money in your business and the amount you made doesn't cover all of your monthly expenses?
So you need to have a business emergency fund set up in case this ever happens. Hopefully it never does happen and the money can just sit there and accumulate interest for you. But this is a contingency plan that you need to have in place.
You can also name this fund anything you want to, it doesn't have to be an emergency fund. It can business savings, peace of mind savings, expenses savings, just name it something that you want it to be known as for you and your business.
How can you build a business emergency fund quickly and easily?
Idea #1 - Figure out how much you need in your business emergency fund.
You can't build this fund quickly or easily if you don't even know how much you need. You are going to want to have 6 months to a year's worth of expenses saved in this fund.
These are going to be the bare minimum expenses that no matter what happens to your business, you are still paying these expenses each month.
They will include things like your email service, subscriptions of tools and tech that you use to keep your business and website running, your website, any assistants that you have, legal, etc. They are the things that you can't stop paying or something will fall apart in your business, whether you are actively running it or not.
You will also need to include your own monthly salary. You started your business to be able to make more money for yourself, so you should definitely be drawing a salary as well.
Idea #2 - Now that you know how much you need in this fund, launch a product or service to make this money.
Using the perfect pricing worksheet, figure out what would be the perfect price for your product or service. Then figure out how many of these you need to sell build your business emergency fund.
You may already have a product or service that you can launch again easily with very little work on your part. This would make building this fund even easier.
No matter what you are going to have to sell something in your business to build this emergency fund.
The product or service you are selling to build this fund is something different from your normal monthly sales because this is money that is needed on top of your regular monthly expenses so you can funnel it into an account to save it for later.
Idea #3 - After your monthly expenses are covered this month, funnel as much as you can into your business emergency fund.
You are already making money this month in your business, so after paying your monthly expenses, funnel your extra money into your business emergency fund.
If you don't want to do a separate product or service launch this month, then the extra money that you make this month can then be funneled into your business emergency fund to save for later. That is, if you make enough extra to cover all of your expenses, paying yourself, and setting money aside for taxes.
No one else knows your business like you do. So you are going to know the best course of action to take to build your business emergency fund and get the extra money that you need.
Idea #4 - Cut back on unnecessary spending
Do you have a bare minimum budget in your business and you only spend on the necessary things that really support your business?
Or are you spending money on things in your business that you don't even use, but are afraid to cancel because you'll need it the second you cancel your account?
I know how this works. I've been there. I was paying for a membership to Adobe Creative Cloud and I was afraid to cancel it because I really liked having 2 specific programs - Indesign and Audition. But I hadn't used either program in over 6 months, but yet I was still paying $53 a month for this membership. I cancelled it and still haven't used the program. But I was afraid to cancel it because I had the thought in my head that I would need it as soon as I canceled it.
Spending money on something you aren't even using is just wasting the money. You could be using that money somewhere else in your business.
Other Tips for Your Business Emergency Fund
Just like your personal emergency fund, you need to treat your business emergency fund as just that, only for emergencies.
It is there provide you a peace of mind should something happen to you. Hopefully nothing ever does happen to you for you need to this fund.
This is not a fund that should be tapped into just because the money is sitting there and you want to make this investment or that investment in your business this month. Create a different fund for investing in your business so that you can tap into it whenever you want.
Just knowing that you have a business emergency fund in place to help your business should (but hopefully not) something ever happen to you, will give you a peace of mind that your business will keep running.
Set up a Passive Income Source
It takes time to set up a passive income source that actually works. But you can set one up so that even if something were to happen to you or you decided to take a vacation, you are still making money in your business.
Passive income sources can include things like having a shop on your website to sell workshops, courses, worksheets, workbooks, etc. that anyone can start and finish without your assistance; running ads on your blog; and being an affiliate for others products and courses.
Even though you set up these income sources, you are also going to need to have ways that lead people to them on a daily basis. These can be things like blogs posts that you share on social media and Pinterest on a regular basis; setting up SEO to work for you; and even just normal social media posts that don't include blog posts.
Practice Delayed Gratification
You don't always need every single new course that is made available on the web. You may feel like you have FOMO right now, but stop and think about it for a minute. How is that new course or book going to help your business? Are you going to get a return on your investment from that course quickly?
We live in a period of time where instant gratification is the thing right now. But not everything is going to help you. You don't always need to buy every course that becomes available.
Even if you just wait 48 hours before making the purchase and deciding if you really need it or not, you are still delaying your gratification.
Are you struggling with making enough money in your business? Are you going to be able to build your business emergency fund? Does your business make enough money to cover all of your business expenses and pay you a full time salary and have enough left over to build your savings?
These are all things you should be thinking about as a business owner in order to have a sustainable business.
Are you going to start building your business emergency fund today?
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Save this post for the future when you really do need to build your business emergency fund because funds in your business are tight.