I’ve often told people that before setting up a business, they need to have saved six months of expenses — rent, groceries, eating out, transport, fuel, insurance, doctor visits, holidays — everything it takes to live normally for six months.
And don’t exclude what you need to work, either.
If you need to budget for six months of Adobe products, do it. At what Adobe charges these days, skipping that line item means beans on toast for March.
Why six months?
It’s a good round figure that gives a business enough time to actually get off the ground.
Roughly speaking: easily the first two to six weeks go on setup — logo, website, the admin that has to happen before you can bill anyone. It can go longer, but let’s say you can get yourself up and running in around 6 weeks.
The next few weeks to two months you’re pitching, and here’s the thing you might have not thought of, though anyone who’s done this for any length of time will tell you — you might pitch today and not hear back for three months. Spoiler alert — sometimes you won’t even hear back at all, ever.
And then, even once you do land work and invoice it, net 30 is a polite fiction.
In practice, expect payment in 60 to 90 days.
Add all of that up, and six months of buffer is the difference between a comfortable start and a stressful one.
Or rather, let’s be realistic — you’re going to be stressed one way or another, but this way you’re just stressed, not starving too.
This is lived experience, not theory.
I’m no financial planner — but I’ve been doing this self-employed lark for 15 years, so I’ve seen the sun rise and fall a few times.
And honestly, even now, I still keep roughly six months of operating reserves.
Why?
So that if two clients decide not to pay, I’m able to pay my team regardless — because it’s on the strength of my team that I can pitch for certain work, and I need them around me.
So the discipline of maintaining reserves isn’t just paranoia.
It’s good practice.
The Russians say: “doveryai, no proveryai”. In English: “trust, but verify.”
I trust we’ll be fine. I confirm by always having something in reserve.
