PopUP! Series 💰 Part 3/3: Money Habits - A buffer to set you free!

In this episode, we discusses the importance of financial resilience for business owners, and why every business needs a cash buffer.

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Publisher: CD Baby (IPI 700570289)

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Transcript

Ilonka Ras (00:00.216)
We are wrapping up this short series with one of the most freeing financial shifts you can make as a business owner. It's not sexy. It's not flashy. It's super simple, but it will give you something no amount of revenue alone can, and that is breathing room. Because here's the truth, life happens. Markets change, leads slow down, unexpected expenses hit. This episode is about making sure your business

and your nervous system can handle it. Let's go.

Here's your host, Strategic Intervention Coach and Operations Specialist, Ilonka Ras.

Ilonka Ras (01:06.294)
Most business owners are running way too close to the edge. They are literally days away from disaster because every month they clean out their bank accounts with expenses, payments, everything goes out and nothing gets saved or very little gets saved. There is no margin, no buffer. And when things happen that are unexpected, it always do, it can be a nightmare. In the famous words,

Winter is always coming and this is not to scare you or to incite fear. It's really an invitation to prepare yourself. Now, if you've ever been in a situation where you are a couple of days away from having to make payroll and you realize that you don't have enough money in the bank account, you feel that fit in your stomach and you can't sleep, this episode is for you. Because the thing is, client projects get delayed, proposals don't close.

someone pays late and all of a sudden you're funding the business with another loan or a credit card just to float yourself through the month. And although this might work, it's definitely not sustainable and it's also very stressful. Many business owners find themselves in this situation and this episode is for you to know that it's solvable in a really simple, easy way.

The way is to set up a cash buffer inside of your business. actually call this a cash reserves account. So here's the thing. You can't make bold strategic decisions from a place of panic and fear. When you don't have cash in the bank, when you don't have a buffer of money in your business, you will find yourself saying yes to clients that you know you shouldn't and don't want to. You will bend over backwards in an attempt to keep clients that

you shouldn't actually continue working with or don't need to work with or wouldn't work with if you had more money in the bank. And you will under price yourself to secure the next sale, often losing on projects just so that you could get the revenue coming in, not realizing that this is actually hurting the business more than it's helping. Bottom line, if you are working from a place of panic and fear, you are making emotional decisions.

Ilonka Ras (03:24.478)
And this puts you on the back foot, puts you in a position where you are going to do things that you resent at the end of the day. So the solution is to build up a cash buffer. So what I typically suggest to my clients is that they set a goal of three to six months of basic business expenses.

calculate how much your business expenses are every month and then multiply that by three or six, depending on what you think is a better buffer to have. Some of us have a bigger tolerance for risk. So three months makes sense. And for some of us, we want six months because we enjoy having that larger cushion. Regardless of what that number is, I want you to start small. I want you to pick a percentage of revenue that you can put aside every month into a separate

bank account. It's important that it's separate because once the money comes in, we know that things start flowing and things are moving and we're paying things and the money can very quickly be used for something that we didn't necessarily intend. And so we want to, as soon as the money comes in, we want to take it out and put it in a different account.

I call this the cash reserves account. You can call it whatever you want to call it. Some of my clients call it an emergency fund. It doesn't matter what you call it, but it is important that you decide what that money is for in advance. So knowing why you are putting this money aside is really important. Maybe that is emergency payroll, or when you have a slow quarter and you still want to pay yourself the same amount of money that you usually pay yourself. You want to set the rules.

so that it's not just a grab it when you're stressed out account. Okay. Then you want to make this, you want to turn this into a habit. So I always suggest making this part of your money date. So each month, when you review your money, when you look at the numbers, you want to take the percentage that you decided on 2%, 5%, 10%, whatever makes sense for your business. You want to take that money and transfer it into the cash reserves account. And then my friend,

Ilonka Ras (05:30.008)
You want to get used to just seeing the money sit there. And this goes against everything that we typically hear as it relates to money. We're always hearing things like your money has to work for you and you you're losing money. If it's just sitting in a savings account, you're welcome to transfer it to a high interest bearing account. That's also okay. But we want to get used to just having money in the account for winter, for when things don't go as expected.

A lot of business owners feel anxious when they see money sitting in an account. They want to spend it, reinvest it, put it to good use. My invitation for you today is that money sitting in your account for the purpose of creating a buffer is a good use of your money. It's going to release a lot of pressure and anxiety around the bills that you need to pay and the commitments that you have as a business. Building a reserves isn't about fear.

It's about creating stability that doesn't require you to hustle harder or say yes to things that you don't want to say yes to. When you have cash in the bank, you show up differently. You say no more easily. You pause before reacting. You lead with vision and not from the edge of your next payment. If you want help building these habits and shifting your relationship with money from reaction to ownership, I want to invite you to apply for private coaching.

This is the work we do every week. You can head over to the link in the show notes or visit ilongaraz.com forward slash apply to apply to work with me. Thank you so much for joining me in this series. I will see you in the next one.