How much cash reserve should a small business have?

For a small professional service-oriented business (that is, we do NOT manufacture anything, nor have any kind of inventory or major equipment), how much cash should the company hold in reserve? Two months' worth of expenses? Four months' worth?

How much cash reserve should a small business have?
Expenses are the key factor here. 60-90 days of reserve for expenses that you would encounter if the business had to close for some unknown reason for this time period (fire or natural disaster). Usually in a service business your labor expenses can l be reduced in these events. Just make sure you budget for taxes that may still need to be paid.


Consider having the reserve in an interest bearing account--no need to just having it setting in an account not making money.
Reply:10%-15% of annual expenses. so thats about 1.5-2 months worht of expenses..