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The 3 Keys to Building Cash Reserves to Protect Your Business
As an expedite owner-operator, you want the freedom to be your own boss, earn a good living, and provide for your family.
But with that freedom comes responsibility.
That’s because it can be easy—especially if you’re new to the industry—to fall into the trap of spending money as quickly as you take it in, driving your business toward a financial cliff.
So, how can you avoid that trap and put your business on a smoother road to long-term success?
Keep these three keys—what I call the “3 Ms”—in mind.
What are your reasons for building your cash reserves?
This question will help you make sure you're covering all your bases. For example, your list might look something like this:
- Working capital—to smooth out cash flow and cover bills during slow periods
- Truck maintenance and repairs
- Insurance premiums and deductibles
- Medical expenses
- Personal emergencies—such as airfare to travel home in case of a death in the family
- Down payment on a new truck.
Then determine how many cents per mile you should be putting away to ensure you have the funds to cover these items when needed.
How do you figure out what savings amount would work best for you, at your stage in the business?
Speak with other successful owner-operators and industry experts to learn more about the “rules of thumb” they recommend for setting savings amounts.
The key here is to commit to developing a system where you consistently put money away for emergencies, even when things feel tight. This way, you'll have the cash you need, when you need it—to cover your bills, get your truck repaired, and keep your business running smoothly.
One of the keys to breaking poor money habits is to learn what habits to adopt that can help put you on a clear path for building your cash reserves. Here are three books that can guide you through that process.
“Margin: Restoring Emotional, Physical, Financial, and Time Reserves to Overloaded Lives” by Richard Swenson.
Takeaway: If you’re going to succeed as an owner-operator, you must build in some margin—with your schedule and your money. This book helps you reevaluate your priorities, determine the value of rest and simplicity in your life, and learn new strategies for achieving good health and financial stability.
“Profit First: Transform Your Business from a Cash-Eating Monster to a Money-Making Machine” by Mike Michalowicz.
Takeaway: You became an expedite owner-operator to set your schedule, get paid to travel the country, and take charge of your financial future. But if you don’t have tight controls on your cash flow, you could be putting your business dream at risk. This book will teach you how to cultivate good habits that help you take charge of your finances—and your business.
“I Will Teach You to Be Rich” by Ramit Sethi.
Takeaway: So, you’ve developed a strategy for saving money. Now, what do you do with the money you’ve put away? How can you put it to work to grow for you until you need to use it? How can you protect yourself from losing money? In this book, Ramit Sethi provides a 6-week personal finance program based on the four pillars of personal finance—banking, saving, budgeting, and investing—and the wealth-building ideas of entrepreneurship. Although the book is geared to 20-to-35-year-olds, the personal finance strategies are easy to understand and apply to any of us, no matter our age.
The late great Zig Ziglar put it best when he said, “When you do the things you need to do when you need to do them, the day will come when you can do the things you want to do when you want to do them.”
It’s one thing to know what you need to do; it’s entirely another thing to follow through on those objectives. And that’s where accountability comes in to help you stay focused and motivated to put money away in reserves.
So, find someone you trust to help hold you accountable to do the things you “need to do” with your cash so that, down the road, you can experience the fruits of doing the things you “want to do.”
You can also reach out to your local Small Business Development Center (SBDC), a Small Business Administration service paid for by our tax dollars. The SBDC is staffed by experienced business consultants who will meet with you—for free—for one-on-one coaching and accountability.
The Bottom Line
When it comes to your business, cash is oxygen. Without it, your business can’t survive for long. So, commit today to build your cash reserves at a level where your business can thrive no matter what market conditions you face.