If you don’t invest in your own company, it isn’t easy to create growth. You must nurture and care for it as you would a growing child.
When it gets enough love, support, and education, your business can do something amazing!
The only question is this: how much of your profits should get put back into the company to encourage more growth?
At Least 30% of Profits Should Get Directed to Growth
Although everyone has a different opinion, the consensus is that businesses thrive when they get about 30% of the profits reinvested. If you’re in a high-competition industry, that figure might need to reach 50%.
The secret to reinvesting profits is to follow a strategy instead of using a specific percentage or amount.
If you invest too much in one area, you’ll be left short when another desperately requires cash. That’s why some companies use a sliding scale approach where they invest more in the early days and less after a nest egg gets built.
Where does a business start this process? It might mean taking a pay cut for some owners and founders. The money might need to hire staff, grow an ad budget, or expand a website.
There are plenty of buckets from which to choose. It depends on your priorities.
The key here is to avoid debt whenever possible. Avoid the instant-funding loans and other liquid cash options that come with higher interest rates unless there is no other choice.
It’s okay to start your business with outside resources, but to grow your business, you must invest out of your own earnings. If you don’t have anything that requires immediate funding, then invest! Your profits can grow bigger while you wait for the next opportunity.