It can be a heady thing to start making profit with your small business. But before you blow it all on a yacht (or even a tiny replica of one), set aside some money to invest back in your company.
Gordon Hester makes a good point about the difference between an investment and an expense. An expense is something that has to be paid, like the light bill. No one’s forcing you to invest back in your company, but as he says:
“the desired outcome of ANY investment in a business is to produce a result greater than the investment itself.”
So while profit is great, growth is better. Consider what you want your business to look like in a year, three, five, ten. Likely you’d love to add some employees to lighten your work load. Expand your facility to store more inventory. Buy larger orders to realize cost savings. Open new branches. Take a vacation. All of this takes money, so in order to do these things, you have to help your business grow.
What to Invest In
Simply leaving money in your business bank account won’t make it magically quadruple. You’ve got to invest in things, like:
It should be a no brainer that you need to market and advertise your company (and if it’s not, start reading these posts), so let’s move down to Technology. If you’re using a 10-year-old computer that takes sweet talking to work properly, it’s probably costing you time and money you could be putting elsewhere in your company. By investing in new computers that actually work, you’re helping produce that greater result Hester talked about.
If you’re juggling all the different roles in your company, delegating can help you tremendously. By offsetting some of the tasks that anyone can do, you can focus on what only you can do: grow your business.
How Much to Invest
There’s no formula to investing back in your company. Start by setting aside 10% of revenues and saving until you can do something investment worthy. Maybe your first investment is a well-placed ad. Then snowball until you’re investing fully into marketing, then work on technology and people.