A cash reserve is the money a business holds back to cover expenses when revenue dips or stops, measured in months of expenses. It is calculated as cash held divided by average monthly expenses. This calculator sizes the target to how your revenue actually arrives and shows how far you are from it today. Nothing stored.
Recommended reserve
3–4 months
€36,000 to €48,000 at your spend
You hold today
1.2
months — about 35 days
Gap to the low end
€22,000
to reach 3 months of expenses
You hold 1.2 months of expenses — about 35 days. For scale, the JPMorgan Chase Institute found the median small business holds just 27 days. Reaching the low end of your range takes €22,000 more; filled over six months, that is €3,667 a month set aside before anything else — the pay yourself calculator budgets exactly that set-aside ahead of owner pay.
The 3-to-6-month range is a rule of thumb repeated by banks and finance writers, not a measured statistic — the honest version of where it comes from, and where it breaks, is below. If revenue stopped entirely, the months you hold are your runway; the cash runway calculator runs that number against your real burn.
The formula, and what sets the months
Your cash reserve target is monthly operating expenses multiplied by the months you want covered, and the buffer you hold is cash on hand divided by those same expenses. The months come from how volatile your revenue is: even monthly revenue needs less, seasonal revenue needs enough to cross the trough, and lumpy revenue needs the most.
reserve target = monthly operating expenses x target months
buffer you hold = cash on hand / monthly operating expenses
The arithmetic is trivial; the judgment is in the months, and the honest input is volatility. Revenue that arrives evenly every month needs less protection, because a bad month is a dent. Seasonal revenue needs enough to cross the predictable trough with payroll intact.
Lumpy revenue, a few large payments a year, needs the most, because one delayed invoice can be a quarter's income, and when one customer is a big share of revenue the reserve is what turns their payment terms from a threat into an inconvenience.
The rule of thumb, and the measured reality
The 3-to-6-month range is quoted by nearly every bank and finance writer, and it is worth being clear about what it is: a rule of thumb with no study behind it. It is a sane one: it maps to how long finding new revenue or cutting costs actually takes, but it is advice, not data.
The measured figure on this subject points the other way: the JPMorgan Chase Institute's 2016 Cash is King study, from the real account flows of about 600,000 small businesses, found the median held just 27 days of cash buffer. Most businesses are not choosing between three months and six; they are an ordinary slow month away from trouble, which is why the causes and fixes in the cash flow problems guide so often come down to the missing buffer.
Building the reserve is a sequencing decision: it gets filled from profit, on a schedule, before discretionary spending, including owner pay, which is why the pay yourself calculator budgets the reserve set-aside first and pays the owner from what remains. The other benchmark ranges founders track, with their sources, are on the benchmarks page.