When it comes to business expenses, there’s often a never-ending list. Small businesses in the first few years often face challenges in managing their company finances. They feel drained out of money, even after earning a decent profit. That could be because you aren’t managing your company’s profits wisely.
9 Ways to Invest Your Company’s First Profits
Here’s how to invest your company’s first profits:
Reinvest in your business
Earning profits is a good indication of your business. It shows that your business has potential. When that’s the case, you should be reinvesting in your business. Acquire new assets, expand your business operation and grow your team.
Ideally, you should be reinvesting 30% of your profits back into your business. But don’t let this be a ballpark figure. Consider your business goals.
Meanwhile, pause your personal expenses in the first few years of your business. Take only your salary and reinvest the rest in your business. This investment will show results in the next few years.
Invest in Marketing
One mistake small businesses often make is that they don’t invest enough in marketing and promoting their brand.
If your customer isn’t aware of your brand, then how is he going to buy from you. He isn’t going to know if you aren’t going to promote.
With digital media, promoting and marketing your brand has become a lot easier and cheaper. You don’t need to set aside a big budget and hire agencies to build your brand.
Hire a marketing assistant with a good portfolio and you start building your brand. Invest in Facebook and Google ads to get your brand out there. Build your digital presence.
Invest in Employee Training
Employees could be the face of your company. They are the people who are part of your company’s success. A well-trained employee will bring you better business than an affordable employee.
Remember in order to make money, you should be willing to spend some. Invest in employee training. Review your employee’s performances periodically. Look for gaps in their training and fill those gaps.
Invest in Yourself
When I talk about investing in yourself, I don’t mean getting yourself a new car or a new home. Invest in improving your expertise too. You are your company’s most important asset. Appreciate this asset.
Take a few business courses. Invest in marketing or business operation classes. Continue growing because when you grow, your business automatically grows.
Invest in Coaching
Hire a business coach to help you move the company in the right direction. Once a business starts growing, many small business owners find it difficult to manage the growth. It’s okay to feel overwhelmed. A business coach will design a strategic plan for your business. He will coach you on where to focus and invest. He will guide you on how to cut back on losses and maximize profits.
Create a Cash Buffer
You should always have a cash buffer. There will be times when your business goes through its low points. That’s the time when you will be needing cash to run operations smoothly. Your business insurance will not be of any use here.
Ideally, you should have a cash buffer to cover at least six months of operational costs. This includes your rent, your utility bills, production cost, employee salaries, and all overhead expenses. Put this amount in a high-yield savings account.
Invest in Property
Property costs almost also increase in the long run. Invest in a property for your personal or business use. If you are renting a property for your business, you might want to consider buying out the property and going rent-free. This will free up a good portion of your operation costs and you could further invest that in growing your company.
Invest Where You Would Invest Personally
Do you have a personal investment plan? Review your investment plan and figure out if you have been getting a good return on that plan. If yes, then that is where you should be investing a good percentage of your profit.
If you don’t have an investment plan, you might want to talk to a financial advisor to create one for you. The best time to invest is now. And especially when you have started seeing returns on your business investment.
Learn more about investment plans at Crediful here.
Invest in a Charity
Businesses, both small and big ones, are now investing in charitable organizations. People nowadays want to be affiliated with brands that are socially conscious. Invest 5-10% of your business profits into a charity organization.
When choosing a charitable organization, go for one that aligns with your business’s values and target audience. For instance, Tom’s, the shoe company, gifts one pair of shoes for every pair they sell in their store. Even though their shoes are priced a little higher than the market rates, they connect with their audience on an emotional level. That gets them more sales.
The above options only serve to give a rough idea of how you can reinvest in your business growth. When looking for investment options, consider your company’s financial position. Review both long term and short term goals.