How many months of cash should an agency have?
3 months worth? 6 months? 12?
It’s up to you. A more interesting question is: why do you want it there?
Probably a bit of stability to help you sleep at night.
Here’s two tempting routes to stability:
- Cash in bank
- Ability to reduce costs
However, these are basically the ability to lose money.
Dipping into reserves or reducing your own salary to break even.
It’s stability through flexibility (and there will be months that you will need this).
But it’s passive, it might provide a crash mat when you fall but it doesn’t give you something to grab onto and pull yourself back up.
Active stability
Cash doesn’t make you resilient like:
- Long term commitments from clients
- Valuable relationships
- Positive reputation
- Leads in the inbox
These are the things that will make you actively stable.
The reputation and relationships are the foundation that bring new work and bigger commitments. They are the ability to keep winning work and keep your clients, even in the slow times.
Unlike cash, they don’t run out.
You need to balance how you achieve stability and invest cash to establish resilience.
Something for you to consider
Let's look at that list again
- Cash in the bank
- Flexible costs
- Leads in the inbox
- Commitment from clients
- Strong valuable relationships
- Your reputation.
Where are you strong?
What could you work on?
Which, if it disappeared, would leave you wobbling?
Which if it was ten times as good would bring the rest up with it?
Let me know!