Why Moving Companies Need a Cash Reserve

Are you prepared for a slow down in your business? What would happen if you had a couple of bad months or another recession came around?

When your business is booming and the money is flowing in, it’s a great feeling! Sometimes it feels like it will just keep coming! It can be tempting to take a bonus or distribution and go on a shopping spree. Just make sure that you keep a cash reserve. Money is oxygen for your business, don’t suffocate your business by taking out all of the money.

The moving business is seasonal for the most part. Once summer is over, things start to slow down. My first year in business, I didn’t feel the slow down of the off-season because of the momentum I had created in the summer. So when my second summer was over and things started to slow down, I was caught off guard. I didn’t have the cash reserve that I should have had. I bought a house not realizing I would need some extra money to float my company through the off-season.

After that, I always made sure to keep a cash reserve. You never know when you might have a couple of bad months or another 2008 might roll around. You have to be prepared.

Here are some steps you can take to make sure you have the cash when you need it:

     1. Set up a business savings account and attach it to your business checking account.

     2. Every month put a percentage of your revenue in the savings account.

     3. Don’t stop marketing in the off-season.

     4. Wait until off-season is over and things pick back up before you take a distribution or bonus.

If you compared business to war, then money would be your ammunition.  If you don’t have ammunition (cash) to fight, then you’re done. If you want a company that is around for years to come, make sure you have the cash reserve you need to get you through any situation.

You’re in business to make money. You should be able to take a nice salary and the occasional distribution. If your business is running smoothly and profitable, you deserve to buy things for yourself and family. You deserve to take vacations and enjoy your life! Just make sure your business is always well funded.

Watch the video above for the full episode.

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Full Transcript

[The following is the full transcript of this episode.]

Hey my friend, it’s Louis Massaro, author of 10 Rules of a Profitable Moving Company, and founder of Moving Mastery. Today we’re gonna talk about something everybody needs to be doing, especially in the moving business. It’s actually Rule No. 6 of 10 rules of a Profitable Moving Company, which is, keep a cash reserve. This is so important, it’s a seasonal business, there are ways to become busier in the winter and make up for that slow time. But generally, after summer, things start to slow down a little bit. My first year in business… I opened up in February, I was 19, I opened up my office and rolled into summer and started becoming profitable that first summer. And even after the summer, I actually continued to grow a little bit, even though it was off season, just all the work that I was putting in, and just the opening of a new office and being a new mover in the city, I gained some momentum.

So then the year came around, February came around again, I went through my second summer and I was not prepared for what happened after that second summer, which was… I started to plateau a little bit, and then I had a dip in the off-season. Come October, November, December things started to slow down. Well, I already took all the money out of the account and bought a house, and spent the money, thinking that there is enough in there. But I didn’t really account for the slowdown. And I see this happen. I work with a lot of moving companies and I see it happen to where you have a great summer, and you’re excited, and you wanna take a bonus or a distribution and go buy a house or a car, take a vacation. Listen, you should. You work hard, you deserve it. Just make sure you’re keeping a cash reserve. The best way to do that is to just set up a savings account, attached to your business account, so it’s a business savings account, and just put a certain percentage of money in there. Every month, just to make sure you’re good through the off-season.

If you need to take it as a distribution or as a bonus, wait. Wait until the year is over. Wait until moving season starts again, and if it’s still there, then you could take it. But you know what? Oxygen and money are the same thing. You need oxygen to live and to breath, while your business needs money to live and breath. And if you take out all the money, and you get in a bad position, it’s like suffocating. Money is the oxygen for your business. Don’t suffocate your business by taking out all the money. Too many times, this is the case. You have to run this like a business. You have to make sure that you’re always well-funded. You don’t want to end up in a position where winter months comes, and you have to cut back on marketing because you don’t have the money to keep it going. You have to keep marketing going. You have to keep certain things going all year round. Because you know what? Money you spend for marketing in the winter, is gonna result in moves in the spring.

Now yes, there are things you can cut back on each year as you come into the off-season. But you have to keep a cash reserve. Imagine if you just had a couple of bad months. It happens, things happen that are out of our control. I’ve gone through it, things like you wouldn’t expect, they happen. You just think, “Oh, we don’t prepare for the worst case scenario,” but it’s the guys that have the cash reserve when things go bad, when the 2008s come, that almost put me out of business, that almost caused me to go bankrupt. With offices throughout the country, I was able to continue to float those businesses and get through that time. But you know what? A lot of people went under, quick. And it was still a struggle for me. I wish I had more of a cash reserve.

So the point is, anything could happen. A couple of bad months could happen for whatever reason. Just recently we had an election. As you know, you probably felt a little slowdown around election time. You know, people are a little uncertain and things weren’t quite… They didn’t know what was going on. And you don’t want a couple of bad months for whatever reason. Whether it’s an election, or the year before there was something with the mortgage companies in the way that they change, the way they need to process loans. That caused a slowdown in our business. You don’t want that to put you out of business. You need to keep a cash reserve. I’m not sitting here telling you don’t spend your money, I’m not sitting here telling you don’t live the lifestyle you wanna live and buy the things you wanna buy. But if you don’t have ammunition to continue the fight in business… Business is tough, a lot of people, you could compare business to war, and if you don’t have ammunition to fight, then you’re done. You’re out. You’re over.

So keep a cash reserve. Set up an account, attach it to your business account and keep some money in there. You never know when you’re gonna need it. You never know, not even for the bad times. Let’s not just make this a doomsday scenario. Maybe a great opportunity comes up. Maybe there’s just a great investment opportunity for your business that because you have that extra money, you can jump on. You could capitalize on. Has there been anything that’s ever come up, that you just couldn’t get involved with because you didn’t have the funding? You didn’t have the money? The cash reserve could be used for that too. At the end of the day, don’t run your business on a bare bones minimum. Don’t make money, and take it all out and spend it. You need to make sure there’s money there for the business to be healthy. And it’s just gonna help you in so many different ways. So if you not doing that, start doing that. It’s so important. Go out there, continue to profit in business. Continue to thrive in life, I’ll see you next week.