Running a Business

Reinvesting Profits Into Your Business

Written by Nidhi Ann Raj for Gaebler Ventures

What's the best use of your small business profits? While you can upgrade your car, remodel a home or take a vacation, the best use of profits is often to put the money back into the business

Usually, the first five years of any business is considered to be the slowest, with profits not being as high as expected.

But the gap between the present and your vision for the company's future can be reduced if you make a continuous effort to reinvest your profits, small or big, back into your business.

Most businesses that die out within the first 5 years do so because of lack of appropriate funds to grow. Keeping in mind that growth of the business is the primary objective at this stage, the next few questions that need attention are:- how, when and in what you should invest these profits.

As sales margins increase and cash begins to flow inwards, you are elated to see your efforts bearing fruit. In the process, you may be tempted to splurge those profits on celebrations with family and partners.

To resist this urge, open a separate account for profits alone. The money from this account should be used exclusively to explore new methods to grow- either for product improvement, buying equipment and other facilities, hiring new people, advertising, or marketing campaigns.

You can also invest in reorganizing the modus operandi of your business or even creating new, innovative products.

However, while spending your profits, focus on the value of the expenditure. Spend only on those items that will ensure your business rise out of the pool of small-timers as fast as possible. At the same time, do not invest on factors that do not have a long term value. Keep in mind that reputation is as important as revenue.

With all this reinvesting, you may probably wonder what is your reward for the efforts you put in?

Well, what could be a bigger reward than the pleasure of watching your business grow exponentially in a very small span of time!

Nidhi Ann Raj is a gifted writer who is currently pursuing post-graduate studies at George Brown College in Toronto Canada, where she is specializing in Marketing and Finance.

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