Having a Vault Account Extends Your Runway

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In business we talk about your “company’s runway”. Your runway is how far your company can make it with the cash you have on hand.

The rule of thumb is 3 to 6 months of fixed expenses or your monthly “burn rate”.

Here are some examples of your fixed expense:

  • Payroll

  • Utilities

  • Rent / mortgage

  • Computer software

  • Dues & Subscriptions

So here is the math. If your fixed monthly costs are $10,000 then you need $30,000 to $60,000 of CASH set aside in a vault savings account.

Here is how it works within Profit First.

When you do your quarterly profit distribution half goes to you as the owner (happy dance!) and the other half goes to your vault saving account. If you do not have debt you are paying down you can also use the extra from the Opex account and put it into the vault savings account during your regular allocations. This becomes the money you have on hand to carry your through slow times, allow you to take time off and take advantage of investment opportunities.

If you need help implementing Profit First into your company, we are Profit First Professionals and can make the whole process easy for you!.

Let’s talk.

Profit, BusinessPam JordanComment