How Much Working Capital Should a New Office Keep Available?

A new office should hold enough working capital to meet its planned obligations while the team establishes its operations. There is no standard reserve figure that fits every family. I would build the amount from the actual services, staffing, payment timing, and commitments in the office's plan, then agree in advance how the family will respond if costs exceed the forecast.

Build a Cash Flow View of the Plan

List the office's expected cash outflows by timing and category. Include compensation and professional retainers, accounting and administration, technology, plus occupancy costs, insurance, and project expenses tied to setting up systems or records. Separate amounts due once from those likely to recur. If providers invoice at different intervals or setup work is billed before the office is fully operating, those timing gaps affect the amount of cash needed.

Then compare planned outflows with cash that is actually available to fund the office. Do not count anticipated investment proceeds or discretionary family contributions as available unless the family has decided how and when those funds will be supplied. Where legal, entity, or tax treatment affects how cash is held or moved, talk with your attorney and CPA.

Use Scenarios to Set a Reserve

Prepare a base plan and a stress case. In the stress case, allow for a delayed transition, an unexpected professional expense, or a need to keep an outside provider engaged longer than planned. The purpose is not to predict every event. It is to see whether the office can meet its obligations without making rushed decisions when timing changes.

Also test different operating models. A lean office that outsources selected work may have a different cash pattern than an office that hires several employees and builds internal systems. For each scenario, mark the obligations that cannot easily be paused and the costs that can be reduced. Note which decisions require family approval. A family office cost calculator can help structure the cost assumptions, and a capital call and liquidity planner can help frame timing needs around liquidity events.

Set Rules for Access and Review

Working capital is only useful if the office has clear authority to use it. Document who can approve routine expenses, what requires a second approval, how exceptions are escalated, and how often cash balances and expected outflows are reviewed. In my book, I describe segregated duties around money and approvals for significant movements of funds. That discipline helps the family keep office operating cash distinct from family assets and obligations.

Review the reserve after the office has operated long enough to see real invoices and workload. Update assumptions when staffing, service scope, or investment activity changes. The operational processes guide can help identify recurring work to include. The startup budget discussion covers non-salary costs, and the service provider guide can help you consider which obligations are best handled externally. Those decisions make the reserve an operating plan, not an arbitrary number.

In short, the desire of many families to improve and diversify further often far exceeds their available resources, and this can stress already constrained resources and burn out executives at the top level.

Sources: How to Start a Family Office, The Single Family Office. Informational only, not financial, legal or tax advice.