A cash reserve is what turns a bad month into an inconvenience instead of an emergency. For a med spa, the right size depends on fixed costs, seasonality and how much you owe clients in prepaid services.
Start with fixed costs
Add up the costs you must pay whatever happens: rent, base salaries and support payroll, loan and lease payments, insurance, software and utilities. A common starting point is to hold enough to cover two to three months of these. Choose the higher end if your revenue is seasonal or concentrated in a few providers.
Add prepaid obligations
If clients hold large balances of packages, memberships or gift cards, you will deliver those services without new cash coming in. Hold reserves against a meaningful share of the cost of delivering them: product and provider time, not the full sale price.
Keep taxes separate
Money set aside for income and sales taxes is not part of your reserve. Keep it in its own account.
Consider your risks
- Key-person risk: what happens if a top injector leaves or is out for a month?
- Seasonality: do you have predictable slow months?
- Equipment: could a major device need costly repairs?
- Growth plans: are you about to hire or open a location?
Each of these argues for a larger reserve.
How to build it
- Open a separate savings account for the reserve.
- Transfer a fixed percentage of revenue or profit every month.
- Prioritize the reserve before increasing owner distributions.
- Replenish it after any withdrawal.
When to use it
Use the reserve for genuine shortfalls and emergencies, not planned purchases. Planned investments should have their own budget.
Review twice a year
As fixed costs, prepaid balances and plans change, the right size changes too. Recalculate every six months and adjust your monthly transfer.
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