How much should I set aside for building my business?

July 8, 2002

Subject:  Cash Flow Management
Date:  Thu, 30 May 2002
From:  Abbie J.

Hi Michael

I read your article on Cash Flow Management and I have one question.

I have just started a cleaning business and I only have a couple of clients (presently). I didn't need much money at all to get started but what I'm trying to figure out is how to determine what dollar amount or percentage I should be putting back into my business or putting away in some savings account for my business. I currently have a SMALL cushion of funds put away for cleaning supplies, etc.

Thanks in advance for your suggestions.

Abbie J.

Answer

Date:  28 Jun 2002

Hello Abbie,

There is no set percentage or amount. Be sure you have set aside enough cash to pay your income taxes. Then project what your requirements are for expanding your business. Remember, there can be big jumps in your cash requirements when you require a business location and when you start hiring employees.

It sounds like you are starting very small, but you should still be seeking advice. Consider consulting with an enrolled agent.

Good luck!

Mike Gray

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