As a start-up company, you want to make sure your ultimate focus is on stabilizing your bank account’s balance. All your strategic moves follow this single bottom line. Why else would you start a new campaign, offer a new service, or increase your prices if it wasn’t to see that ending balance grow?
That’s why this piece of advice we’re about to share is extremely important for your business, its health, and its sustainability.
You need to have a savings account that covers at least three months of expenses.
Why This Matters
Home care agencies face a lot of turnovers and the average expectancy for a client is eight months, no matter if they signed up for 24-hour care, long-term care, or any highly lucrative service you offer. At some point, they no longer become a client of yours for whatever reason. It’s not always about a life facing its final moments. Many times, clients leave us because our agency doesn’t offer a more comprehensive type of care that involves medical attention, hospice, or specialized services. There are always limitations, and many seniors require a fully versed staff.
Chances are you also experience a ton of turnover from your caregivers. Honestly, if you found the secret to solving this problem, you’d completely change the home care industry and can expect to make a lot of money off that. In other words, it’s common, and every in-home care business faces it.
It doesn’t even have to be in your region. Sure, some locations have larger cities they cover while others remain in a single small town. There is still turnover, despite if you cover the entire state of Georgia, offering senior care in Atlanta, Dunwoody, Roswell, Santa Springs, you name it, or if you cover a larger yet sole city like Los Angeles, California and no outskirt cities. You will face the costs that are involved in people quitting and people ending their contract to utilize your care.
What Can You Do
You’ll need to see what funds you have remaining at the end of each month and see what needs to be allocated for current bills coming up in the next two weeks, until you have enough remaining funds to cover an entire month. Every month, what you see remaining after all expenses can continuously get deposited into this savings account so it can grow and grow.
Your job is to know exactly what expenses you have, even when you have turnover, and take your best guess as to how much you can put into savings after all those expenses. Yes, you will need to keep a close eye on your balance and all the hiccups that can occur each month – and they will – so you can ensure that in the future, when a hiccup does happen, you have the funds to cover them.
The entire idea is to work with “old money” and not “new money”. So, we’re going to call this savings account the Old Money account. Covering emergencies with new money is the equivalent to living paycheck-to-paycheck and scrambling to find clients out of desperation so you don’t hit a negative with your balance. Old money is money that has been sat in your account waiting for its job, accumulating with the sole purpose to one day be spent on current expenses. Essentially it is old because it hasn’t been spent, and it ages as new money comes in. You want to get away from covering everything you do in business with just new money. That’s risky. That’s unstable when an emergency does hit.
What Emergencies Can Old Money Cover?
- Losing a client
- Unexpected fees
- Taxes
- Employees quitting
Your emergency funds can be separated from this Old Money Account and probably should be. You can have two accounts you build if you have enough money remaining at the end of the month. You can divvy up the funds to support both savings accounts. However, the point of this Old Money account is to cover your monthly expenses when your new money can’t. Save your emergency funds for unexpected expenses that happen once in a blue moon and use your Old Money account for moments when you get setback from the list above, meaning it’s more permanent than a one-time unexpected hit.
Hopefully you won’t need to access it, but that’s not likely. Think about your own personal life and how blessed you would be to have a savings account like this! What if you got laid off from your role or demoted and had no foreseeable income to cover your expenses? It happens, CEOs, it happens. Wouldn’t you want to have several months of supported income saved up to help until you get back on your feet? The same thing applies in your home care business.
You don’t want to be caught off guard. You want the peace of mind to know that your business can still run because the finances are there to support this downtime. Buy yourself the time now so that you don’t find yourself scrambling to make ends meet, just to make a hasty decision and offer a weird and unworthy service for quick cash. And before you think about what you can do with your awesome credit score… No one should ever max out credit cards to keep their business alive. Start building your Old Money Savings account now.