I now know a ridiculous amount of information about how squirrels store nuts for the winter all because I searched online for, “What do you call the hole that squirrels store nuts in?” It’s called a cache, by the way. I know that most squirrels dig lots of holes in the ground to hide their nuts which is so they can spread their risk. If one cache of nuts goes missing, they just move on to the next one.

But there are some squirrels that don’t worry about saving for winter at all and the closest they get is leaving half eaten nuts in branches which they hope are still there when they come back. A bit risky, if you ask me.

You can see where I’m going here, can’t you? I’m going to try to convince you to squirrel away some money when times are good so that your business has security when your ‘business winter’ sets in. In fact, I want you to have your very own ‘Just in Case’ cache.

Most businesses, especially those in retail, go through cyclical ups and downs throughout the year. Customers change their spending enormously based on the weather, school holidays and festive events and, because they all seem to do it at once, it can hit your business really hard. What’s worse is that you probably have to buy in stock during the lean months so that you’re prepared for the busier ones that follow. Let’s face it, business can be feast or famine.

But also, sometimes bad stuff happens! You never really know when a piece of equipment fails, stock gets damaged in transit, your truck breaks down, or a pandemic strikes out of the blue. No one saw that one coming, did they? These are the things that you could never envisage but which could happen at any time, and so you need to prepare for them - just in case.

“Just like squirrels, you need a cache of money tucked away so that when bad stuff happens, you can solve it quickly and keep on trading.”

— Kath

I clearly remember the impact of winter and wet weekends on my production nursery years ago that supplied retail garden centres. Every week I would head out to visit the owners and managers to convince them to place orders as part of our vendor-refill service. In winter these orders were sometimes few and far between, especially if it had been a wet weekend. The problem was, we couldn’t stop growing plants as we would have nothing to sell when spring hit, so whilst I had very little money coming in, I still had to fork out for pots, potting mix, seed and labour. After a couple of years of doing winters tough, I soon learnt that I literally had to put money aside for a rainy day.

During this time there was one garden centre owner that fascinated me though. Over the years of visiting him, I worked out that I could almost track his moods with the changes of the seasons. His name was James.

I would visit James every week on my rounds. He owned a particularly stunning boutique garden centre full of lush foliage and carefully curated plants with intricate stone sculptures tucked amongst ferns and delicate suncatchers giving the space almost as much sparkle as he did. His nursery felt like a secret garden.

During spring and summer, he was like a kid on Christmas morning. He was full of optimism, motivation and sheer joy as customers swarmed into his beautiful nursery ready to spend money on their gardens. He flitted from one to the next as if he was the host of a cocktail party, and basked in the praise of everyone that visited. He was rewarded by the triumphant ringing of money going into his till.

However, come autumn, James would start to lose his sparkle and by winter, he was almost in the doldrums. His customers stayed at home, it was too wet and cold to get out into the garden. No one visited, he had to cut his wages, his till fell quiet and his income diminished. The longer that winter went on, the more stressed and depressed he would become. The only thing that kept him going was knowing that spring was just around the corner.

Many small business owners experience what James did, it’s not just in the horticulture industry. There is nothing that makes a business owner happier than knowing they have a healthy cash flow.

I bet that your business has lean months too. Can you pin point them? Perhaps January after the Christmas frenzy is over or in the weeks after the kids go back to school. If you’re in a tourist region it will be when the season is over and everyone goes back to work.

Imagine how much more relaxed you would be if you had some funds stashed away for those quieter months - it’s not just important for your business but for your own sanity as well.

When your business is busy, squirrel away some money each week into a separate bank account - a ‘Just in Case’ cache. Do small amounts regularly as you never know if winter will come early and if you have to use some of it, top it back up.

But, how much is enough?

HOW MUCH IS ENOUGH?

In general, aim to set aside between 3 and 6 months of your business’s operating expenses for emergencies and seasonal downturns. That is, in your ‘Just in Case’ cache.

This should cover:

Rent or mortgage payments
Payroll (including yours)
Utilities (electricity, water, internet, phone)
Stock purchases
Insurance
Loans & credit cards
Marketing

Make sure you consider your business’s volatility. If it’s on the riskier side, aim for six months but if your business is fairly insulated, then three months might be enough.

And, don’t forget, if you have to dip into it during the leaner months, top it up again when business is booming.

I know I’m sounding like a party pooper. You’ve had a ripper few months. You’ve worked hard and you deserve to treat yourself. Perhaps buy a boat, get some new outdoor furniture, go on that expensive trip overseas - and I agree with all of that. A business should give you the lifestyle that you want and deserve but there is nothing quite as stressful as having cash flow problems knowing that you have bills and wages to pay. If you’ve felt this stress before, you know what I mean. It’s that dreaded pit in your stomach that won’t go away.

By planning ahead you can save yourself from that stress and whilst it might take you a bit longer to achieve those bigger lifestyle goals such as the boat and holiday, you would have achieved the financial freedom that means you don’t have to worry and stress about money.

Just like squirrels, you need several caches in business. As well as your working capital, you should have a ‘Just in Case’ cache ready for emergencies and the leaner months - you need to fill it up during the busy months and top it up again if you need to use it. But also, set up a ‘Just for Fun’ one and put a little bit into it whenever you have a some extra cash. That way, when you’re relaxing on the boat or lazing by some exotic pool on holidays, you can do so knowing that you’ve set aside the funds necessary for your business to remain operational during the slow months.

“A business should give you the lifestyle that you want and deserve but there is nothing quite as stressful as having cash flow problems knowing that you have bills and wages to pay. ”

— Kath