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Wise Ways to Reinvest in Your Small Business
  • 13 October 2019
  • Jelani Markus

Wise Ways to Reinvest in Your Small Business

Just as a plant parent knows sun, water and a little love are needed for flourishing results, small business owners know certain components go into creating a thriving business. Growth requires using the power of your profits for the right kind of reinvestment. Here are a few important tips to help you find the when, why and where of wise small business reinvesting.

Wise Ways to Reinvest in Your Small Business

When is it time to reinvest?

The question of when to reinvest profits into the growth of your company is a fairly easy one. You should develop and initiate a strategy for business reinvestment as soon as you turn a profit. Profit is obviously the goal of any business, but how you spend it is key to sustained growth. There are ways to calculate what amount works best for your business, but the sweet spot for profit reinvestment is 30% to 50%. This is not a perfect amount for everyone, but it is a good starting point to frame your plan for expansion.

Why not just keep the profits?

High profit yields can be tempting. As you see your business doing well, you might think now is a great time to splurge on that big-ticket item or experience you have been dreaming of. But that can be shortsighted. There are plenty of reasons to reinvest in your small business, but the biggest for many owners is the continued success of your small business.

Where should the money go?

As a small business owner, it would be hard to go wrong investing in the following business components:

Wise Ways to Reinvest in Your Small Business

  • Infrastructure - This should include building up where your work is done and how efficiently it can be completed. Always keep the latest and greatest in hardware and software in mind, especially the price tag.

  • Business Improvements - Outside of hardware and software, improvements to the way your business is run are also crucial. Investing time and some money into business classes to help improve you and your team is an excellent way to grow the quality of your business.

  • Workforce - As your business grows, so will your need for quality team members. Orientation, payroll and benefits are all part of introducing someone new to your team. On top of new hires, there is money to be spent in employee retention. Plan to do what you can to make your business a great place to work for newcomers and veterans. When you do it well, that investment pays back dividends.

  • Marketing - Once word of mouth has taken you as far as it can, it is time to reach more customers with a carefully crafted marketing plan. This can be done in-house with hired experts on your team or by enlisting in an agency that specializes in advertising and marketing. Bring more consumers to you by letting them know you are out there.

Everything, sadly, cannot grow all at once. You want to choose priorities with a “supply and demand” mind-set. Consider things to reinvest in that will lead to enough profit growth to tackle the next goal. As you rinse and repeat this process, you’ll watch your business become stronger and more substantial as a result.

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