Free lesson · 10 minute read · Reseller Growth Systems
Cash Reserve and Exposure Limits
Keep enough cash outside inventory to absorb refunds, repairs, and opportunities while limiting concentration in one model.
Your goal
Set a minimum cash floor and maximum exposure per category/model.
When to use
Use before increasing purchase volume or buying multiples of one product.
Why this matters
Profitable resellers can still become financially fragile when nearly all cash is trapped in inventory.
The lesson
Growth creates a temptation to reinvest every dollar. That feels productive because inventory increases, but it can leave the business unable to handle normal shocks.
Create a cash reserve for refunds, repairs, shipping surprises, taxes where applicable, operating expenses, and strong sourcing opportunities. Treat that reserve as unavailable for routine purchases.
Then create exposure limits. A single product can be profitable and still become dangerous if too much of your capital is concentrated in it. Consider price volatility, typical days to sell, defect rate, and how quickly you could liquidate the position.
Exposure can be defined as a percentage of total inventory capital or a fixed dollar amount. New or volatile categories should have smaller limits until you have data.
The point is not avoiding risk. It is preventing one bad model, supplier, or market drop from controlling the entire business.
Review reserve and exposure weekly as inventory grows.
Worked example
You have $10,000 business cash. You decide $2,000 stays as reserve and no single laptop model may exceed $2,500 landed cost. A supplier offers five units at an attractive price totaling $4,500. The unit price is good, but the concentration violates your rule—so negotiate quantity, not just price.
Practical checklist
- Total cash
- Minimum reserve
- Available buying power
- Category exposure limit
- Model exposure limit
- Refund/repair reserve
- Opportunity reserve
Common mistakes
- Counting reserve as buying power
- Buying too many units because the unit price is lower
- Ignoring volatility
- Using revenue as a proxy for cash
Key takeaways
- Cash reserve creates resilience
- Concentration is risk even when each unit looks profitable
- Negotiate quantity when exposure is too high
Put this into practice
Set a cash floor and two exposure limits: one per category and one per exact model.
Before you finish
A bulk offer cannot force you to risk more capital than your written limit.
Progress is saved on this device; no account required.