How much cash reserve should an SEO agency hold?

Key takeaways

• Hold 3-6 months of operating expenses. This is the standard working capital buffer for a stable SEO agency to cover rent, salaries, software, and other fixed costs if income stops.
• Your emergency savings target depends on your business model. Agencies reliant on a few large retainers need more cash than those with many small, diversified clients.
• Calculate your cash flow runway monthly. Divide your cash balance by your average monthly burn rate. A runway under 3 months is a red flag requiring immediate action.
• Build reserves from profit, not revenue. Automatically transfer a percentage of monthly net profit (e.g., 10-20%) to a separate business savings account.
• Cash reserves are for stability, not stagnation. Use your buffer to invest in opportunities, hire strategically, or weather industry changes without panic.

What is a cash reserve and why do SEO agencies need one?

A cash reserve is money your agency keeps in the bank, separate from day-to-day spending. Think of it as a financial airbag. It's there to protect your business if you suddenly hit a bump.

SEO agencies need this buffer more than many businesses. Your income depends on client retainers. If a big client leaves or delays payment, your monthly income can drop overnight. A cash reserve means you can still pay your team, your rent, and your tools while you find a new client or chase the invoice.

Without this buffer, you're forced to make bad decisions. You might take on a terrible client just for the cash. You might delay paying your own bills and damage supplier relationships. Or worse, you might not make payroll. A solid SEO agency cash reserve strategy turns you from a reactive business into a resilient one.

How much cash should an SEO agency actually hold in reserve?

Most stable SEO agencies should aim to hold 3 to 6 months of their operating expenses in cash. This is your working capital buffer. It covers all the costs of running your agency if your income temporarily stops.

To find your number, list your average monthly fixed costs. Include team salaries, freelancer fees, rent, software subscriptions (like Ahrefs, SEMrush), utilities, and insurance. Don't include variable costs like client ad spend or one-off project expenses. If these total £20,000 per month, a 3-month reserve is £60,000. A 6-month reserve is £120,000.

Where you sit in the 3-6 month range depends on your risk. Are you a solo founder with low overhead? You might be okay with 3 months. Do you have 10 employees and a big office lease? Target 6 months. In our experience, the most common mistake SEO agencies make is underestimating how long it takes to replace a lost retainer. It's rarely just one month.

What's the difference between a working capital buffer and emergency savings?

Your working capital buffer is for expected, operational gaps in cash flow. Your emergency savings target is for true, unexpected disasters. In practice, they often come from the same pot of money, but it's helpful to think about them separately.

Your working capital buffer handles the predictable rough patches. A client pays 60 days late. A key employee leaves and you need to hire a temp. A quarterly tax bill is due. These are operational realities.

Your emergency savings target is for black swan events. A global algorithm update devastates your service model. Your lead generator gets seriously ill. A lawsuit arises. For these scenarios, having cash beyond your 3-6 month buffer is wise. Many agencies we work with build towards a 12-month ultimate safety net once they are profitable.

This distinction matters for your SEO agency cash reserve strategy. It tells you when to dip into reserves (for a planned investment) versus when to preserve them at all costs (for a genuine emergency).

How do you calculate your cash flow runway?

Your cash flow runway is how many months your agency can survive at its current spending rate if all income stopped today. It's the most important number to watch for survival. You calculate it by dividing your total cash reserve by your average monthly net burn rate.

First, find your net burn rate. Take your total cash outflows for the last 3 months (everything you spent) and subtract your total cash inflows (everything you earned). Divide that number by 3 to get a monthly average. If you're spending more than you earn, this is a negative number - your burn rate.

For example, if you have £75,000 in the bank and your agency is burning £15,000 more than it earns each month, your runway is 5 months (£75,000 / £15,000). These cash flow runway tips are vital: if your runway dips below 3 months, you must take immediate action. Cut non-essential costs, accelerate invoicing, or secure a line of credit.

You should calculate this runway at least once a month. Good accounting software like Xero or QuickBooks can help track this automatically. To see how your agency's financial health stacks up across cash flow, profitability, and operational efficiency, take our free Agency Profit Score — it takes just 5 minutes and gives you a personalised report.

What are the biggest mistakes SEO agencies make with cash reserves?

The biggest mistake is having no formal strategy at all. Cash just sits in, or drains from, the main account. This leads to two dangerous errors: holding too little cash, or tying up too much cash in the wrong places.

Holding too little cash is obvious. It creates constant stress and forces bad business decisions. The more subtle error is tying up cash in things that aren't liquid. For SEO agencies, this often means over-investing in long-term software contracts, expensive office fit-outs, or hiring full-time staff before the recurring revenue is secured to pay them.

Another common mistake is funding reserves from the top line. If you put 10% of revenue aside, but your net profit margin is only 15%, you're starving your own profitability. Reserves should be built from net profit. Finally, many agencies treat the reserve as untouchable. It should be a dynamic tool. Use it to seize a opportunity, like hiring a star employee from a competitor, but always with a plan to replenish it.

How should a growing SEO agency build its cash reserves?

Build your reserves slowly and automatically from your profits. Don't try to save a huge lump sum overnight. The most effective method is to set up a automatic bank transfer each month.

Decide on a percentage of your monthly net profit to save. A good rule is 10-20%. When you close your monthly books and see your profit, transfer that percentage to a separate, high-yield business savings account. This makes saving non-negotiable and separates the money from your operating account so you're not tempted to spend it.

For a growing agency, this requires discipline. The temptation is to reinvest every penny into growth - more hires, more tools, more marketing. But growth without a safety net is fragile. A study by Harvard Business Review highlights that companies with strong liquidity are better positioned to invest strategically when opportunities arise. Your reserve enables smarter growth, not prevents it.

If you're not yet profitable, focus on reaching profitability first. Then, make your emergency savings target your first "profit distribution" before paying bonuses or dividends to owners.

When is it okay to use your agency's cash reserves?

It's okay to use your reserves for strategic investments that will help your agency grow or become more secure. The key is that the spending should be planned, and you should have a clear path to replenishing the cash.

Good uses include investing in a key hire before a new retainer starts, buying out a competitor's client list, or funding a new service line development. It can also be used to smooth over a predictable rough patch, like covering salaries during a known slow season for SEO projects.

Bad uses are covering for ongoing operational losses. If you're dipping into reserves every month to pay bills, you have a fundamental profitability problem. The reserve is a parachute, not the engine. Using it for non-essential owner drawings or luxury purchases also puts the business at unnecessary risk.

Always ask: "Will this use of cash generate more cash (or reduce risk) in the future?" If the answer is yes, and you have a repayment plan, it's likely a good use. This proactive approach is what separates a strategic SEO agency cash reserve strategy from a simple savings account.

What specific risks should an SEO agency's reserve cover?

An SEO agency's reserve should be sized to cover sector-specific risks that other businesses might not face. Your working capital buffer needs to account for the unique rhythm of the SEO industry.

The biggest risk is client churn. SEO is a long-term game, but clients can be impatient. If a key retainer representing 30% of your income cancels, how long will it take to replace that revenue? For most agencies, it takes 3-6 months of business development to land a client of similar size.

Other specific risks include tool cost inflation (SEO software prices rise regularly), algorithm update fallout (requiring sudden, unbillable remedial work), and talent poaching (needing to offer a counter-offer to keep a crucial specialist). Your reserve gives you time to adapt without financial panic.

Specialist accountants for SEO agencies understand these cycles. They can help you model these specific scenarios to ensure your cash target is realistic, not just a generic guess.

How do retainers versus project work affect your cash reserve target?

Retainer-based agencies can often hold slightly smaller reserves than project-based agencies, but they must be more diligent about collecting them. The predictability of retainers is their strength, but only if the cash actually arrives on time.

If 90% of your income is from monthly retainers, your income is predictable. Your reserve can be closer to the 3-month expense mark, because you have good visibility. However, you must enforce strict payment terms. A 30-day payment term that stretches to 90 days destroys the predictability you rely on.

If you do lots of project work, your income is lumpy. You might have huge cash inflows after a project delivers, followed by dry spells. For this model, a larger reserve—closer to 6 months—is essential. It smooths out the gaps between projects and pays your team during the business development phase for the next big job.

Many SEO agencies mix both. In this case, calculate your reserve based on your fixed monthly costs from retainers, plus the average gap and cost of securing your next project.

What tools and habits help manage an SEO agency cash reserve strategy?

Use simple tools to create powerful habits. Start with a dedicated business savings account. Give it a name like "Agency Safety Fund" in your online banking. This physical separation is psychologically important.

Use your accounting software to create a cash flow forecast. Project your income and expenses for the next 6-12 months. Update it weekly with actual figures. This forecast will show you when you might need to dip into reserves and when you can add to them. These cash flow runway tips turn guesswork into planning.

Make a monthly finance meeting non-negotiable. Review your cash balance, your runway, and your profit. Decide on the monthly transfer to your reserve account. This habit, more than any complex tool, builds financial resilience.

Finally, consider a line of credit as a backup to your cash reserve, not a replacement. It's cheaper to hold your own cash, but a pre-approved credit facility can be a lifesaver if a true emergency exceeds your savings. Speak to your accountant or banker about setting one up while your business is healthy, not when you're desperate.

Getting your SEO agency cash reserve strategy right is a major competitive advantage. It lets you sleep at night, say no to bad clients, and say yes to great opportunities. If the numbers feel overwhelming, start small. Save one month's expenses, then two. The peace of mind it brings transforms how you run your business.

For tailored advice that considers your specific client mix, growth stage, and ambitions, professional guidance is key. If you'd like to understand where your agency stands financially right now, try our Agency Profit Score to get a clear snapshot of your profit visibility, cash flow, and readiness for growth.