Business Structures

The Bottom Line series – 2. How to build your Profit War Chest

 

How much money can be transferred to the War Chest without threatening the health of the business?

Start out slow and easy, then build up.

 


 

Most stable companies should be able to post a profit of 10% - 25% after all expenses.

But, to start off, begin with low threshold, where maybe 5% of every inbound dollar goes to the War Chest.

Over time, slowly increase the percentage.  Monitor your cashflow to see if your business gets woosey.

Don’t stow away too much money too quickly.

 


Just like donating too much blood in one sitting is harmful, rapidly draining cash from a business can cripple or kill your organisation.

 

Once you have adjusted expenses and cash outflow to sustain your Profit War Chest withdrawals, you will quickly accumulate a tremendous cash reserve.

In this case, should tough times come knocking on the door, and they often do,  you will have our Profit War Chest to back you up and if necessary, bail you out.

Of course as your cash reserves grow, they will be in excess of your rainy day needs - our recommendation is 3 months of business expenses.

At that point, you should take a portion as an equity distribution.

Trust me, it’s a really nice way to reward yourself for running a healthy business.

If you’ve never given blood, I strongly recommend you do it.  If you don’t regularly donate to your company's Profit War Chest, I strongly encourage you to start, there’s no question.

 


 

Applying the Cash Rich Business model to your business can literally save its life. As with everything else in your business, you Profit War Chest isn’t going to happen unless you take action.

Start out slow and easy, then build up.