Having a personal emergency fund is critical to building a baseline of financial redundancy and security. If you don’t have an emergency fund, you really should make this a priority in your life, especially as a nurse practitioner entrepreneur. Income can vary as a nurse practitioner entrepreneur, especially during the start up phase, so it is imperative that you have some financial reserves.
The same applies to your business. You should also have a business emergency fund. In simplistic terms, this is just having 3-6 months of practice expenses in the bank. This is NEVER TOUCH IT, NEVER LOSE IT money. It is only to be used in tough times. Businesses that survive recessions and slow times have extra cash reserves. Those that fail, typically do not.
This emergency fund should be enough to keep the doors open. You really don’t need to factor in medications or supplies here as that should be determined on your practice’s revenue and volume. The business emergency fund should cover rent, utilities, payroll, insurance, and a lean marketing budget. Nothing more. Add up these expenses to determine your barebone monthly burn rate. Now you want to have 3 times that amount in your practices bank account at ALL TIMES, preferably 6 months if you truly want to have a financially secure business.
I always keep about $50,000 in my men’s health practices account. This would cover use for about 5-6 months if revenue went to zero (which would be practically impossible). When the bank account hits $50,000, I see ZERO dollars in my mind. The $50,000 doesn’t mean anything because I never touch this money. For my purposes, $50,000 means $0 because I never go below the $50,000 mark. You should do the same in your business as well if you want to have a financially secure practice that can weather the storm during bad times. This is smart business and will help you succeed in your nurse practitioner entrepreneur journey!