How the Cash Reserve Calculator works
Amazon businesses fail from running out of cash more often than from lack of profit. Payouts lag sales by weeks, reorders must be paid before the current stock sells through, and advertising is billed continuously.
A cash reserve sized to your monthly burn, your next reorder and a buffer keeps you from having to choose between paying the supplier and keeping the ads on.
Formula
- Advertising reserve = Monthly ad budget × Months of runway
- Fixed-cost reserve = Monthly fixed costs × Months of runway
- Reorder reserve = Reorder cost × Reorders in the period
- Cash reserve = (Advertising + Fixed + Reorders) × (1 + Buffer %)
- Shortfall = max(0, Reserve − Cash on hand)
Example
About $8,800 reserve: 3 months of $1,150 burn plus a $4,200 reorder and 15% buffer. $6,000 on hand covers 68%, so there is a $2,800 gap.
Monthly advertising budget: 900Monthly fixed costs: 250Months of runway: 3Next reorder cost: 4200Reorders within the runway: 1Safety buffer %: 15Cash on hand (optional): 6000
Frequently asked questions
How many months of runway?
3 months is a common minimum; 6 if you rely on sea freight or sell seasonally.
Does the reserve include inventory already ordered?
No. It is cash to keep available on top of stock you have already paid for.