5 Simple Do’s and Don’ts of Reinvesting Your Business Profits

One of the best things you can do with business profits is to reinvest them in your company (or other business endeavors). It can be exciting to start making profits, of course, and sometimes that makes people question just where they should be spending (or reinvesting) their money. You should be prepared for this with a plan for what to do with the profits so that you don’t just fritter away the earnings without purpose. 

When does a business profit? By definition, a profit occurs when a business has revenues that exceed expenses. And when you consider that 20% of new companies close their doors within two years, you can see that making a profit is an exercise that’s not to be taken lightly. If you’re on the upside of the battle, however, and you want to reinvest those profits in the best ways, here’s what you need to know. 

Do: Spend money on marketing 

One of the best ways that you can reinvest your business profits is to invest in your marketing. This will help you create better marketing campaigns and reach more audiences. Marketing is easy on any budget, but when you have more to spend, you can certainly get more out of it. You should test the waters first, of course, and don’t invest in a full marketing strategy until you’ve done some testing to make sure that your efforts will get noticed. Invest in social media marketing, for sure, because that’s going to be the future for several businesses. 

Don’t: Take big risks 

This is a business profit, not personal fun money. With risk comes reward, but you don’t want to overdo it and lose out on valuable business profits. If someone tells you that those profits would be great to invest in their “million-dollar” idea—walk away. Unless they’ve got a solid business plan and proof that their ideas are profitable, you aren’t going to be able to trust that your funds are safe. You worked hard to earn these profits—make sure that your risks are moderate. 

Do: Invest in your employees 

Another great way to put your profits back to work for your business is to invest that money in your employees. This could be training, benefits, perks and rewards, or even things like creating tuition assistance programs or other employee programs that can help them improve their skills and career path. Your employees are one of your best investments and when you show them that you appreciate them just as much, it will definitely work in your favor. 

Do: Set some aside 

It can be tempting to just keep investing the money and finding new ways to help grow your business. Pay down some debts, get some new office equipment—but be careful, because you don’t want to squander it away. Sure, pay some of your debts if you want, but it’s far more valuable for you to set some of the profits aside for a rainy day. You can keep making your usual debt payments for the time being. Some of your loans or debts might have prepayment penalties, anyway, so you don’t want to cost yourself anything extra. 

Save. Save, save, save. When you need it, you’ll be glad you did. 

Don’t: Forget to insure any investments 

This is the final tip for reinvesting your profits. If you’re putting the money back into your business, make sure that your insurance is up to par so that you can keep dreaming, growing, and building your success. It can be tempting to start tossing money around and not thinking about the consequences, but that’s not a smart business move. If you’re making other investments, check to see how they’re protected and secured so that you aren’t putting your money at risk. You might even want to reinvest a little in boosting the insurance coverage that you do have. 

Strategy Before Spending 

The key to success here is creating a strategy for your profits before you just start spending or reinvesting them. If you aren’t watching where the money is going, you aren’t going to be able to follow it and make sure that you’ve spent it well. Therefore, the very first thing you should do is sit down and make a list of things that you want to do with your profits. Then, you can decide how much of the money goes to each different area and what you expect to get in return. 

For example, you might want to invest most of the profits in marketing in the hopes of returning a new niche market or audience that you might not have discovered before. Perhaps you want to invest more in employee training and internal development so that you can help people move up in the company instead of having to hire from outside. The sky is the limit—just make sure that you start with a plan and the rest will come easily. 

Use the ideas here and come up with your own to create the perfect strategy for your profits. 

Speaking of strategy, why not add a partnership with Smith.ai to your plan?

If you’re looking to reinvest in your business, communications is a great area to focus on. When you partner with the virtual receptionists at Smith.ai, you will be investing in a solution for total communications and administrative needs. From our 24/7 answering service solutions to live website chat, lead intake, appointment scheduling, and so much more, we’ll take care of it all. 

Plus, we’ll also create a strategy to manage all of the needs of your business and if you need help bringing in the leads in the first place, our outreach campaigns and outbound sales support are ready and waiting to help. When you choose Smith.ai, you’re making a smart investment that’s also affordable for just about any budget. 

To learn more, schedule a consultation to discuss what the 24/7 virtual receptionists at Smith.ai can do for your business. You can also reach us at hello@smith.ai or (650) 727-6484.