The best thing about running a small business is that you aren’t limited to receiving a certain amount of income each month. You can have a phenomenally successful month if you get even one more new account, a repeat business deal, or find a new income stream. The downside is that some months can be slow.

For those times, having a cash cushion will help you sleep better at night knowing your rent or mortgage payment isn’t dependent on whether you make that sale tomorrow. It also makes you more at ease when dealing with prospects. Believe me, people can smell desperation a mile away, and no one wants to do business with someone who appears desperate. It screams that you aren’t successful - and that says worlds about how you do business.

Having enough to pay the bills for a few months out lets you approach your business much more strategically. Suddenly, your livelihood isn’t dependent on getting that next account or sale. You can pick and choose the clients that will fit the best with your company rather than taking on anyone and everyone.

This is particularly critical if you are just starting a business. Many of the solo practitioners and start ups I work with underestimate the amount of money it will take for them to start earning income.

If you are considering starting a business, make sure you have at least 6 months income in the bank before you venture out on your own. Sure, you may be extremely lucky and make it big your first month or two in the business - but most businesses don’t. Expect hard times those first few months and plan for it.