Most startups spend their initial profits in reinvesting, and your company should be no exception. The key to reinvesting is to have a sound strategy, not to necessarily devote a certain percentage of your profits. Your reinvestment efforts should be in line with your current strategic plan.
Most business owners choose to reinvest their profits in business improvements – for example, infrastructure, equipment, streamlining business processes, or finding ways to improve the customer experience. These are all valuable strategies because they can increase your profits in the long run, allowing you to expand business operations.
Digital marketing is always a smart investment of profit, when it’s done well. Many of the startups I’ve seen over the years wait several months before they do any real investment into marketing.
Sometimes it’s because they just don’t know where to start. You can’t lose by investing in performance metrics. Always keep track of your campaigns and adjust them accordingly. If you have little experience with marketing, consider outsourcing to an agency.
Building a better workforce will streamline your business, improve productivity, and create the kind of company culture that will attract hard workers. Reinvest profits in human resources initiatives such as training and continuing education.
As your company grows, you can expand to include benefits packages and other discounts. Investing in your employees early on will help you reduce turnover.
If you’re unsure of how you should create your strategic plan, consider using some of your profits to hire a career coach. These professionals can provide guidance on executive leadership, creating a business strategy, talking to investors, and handling conflict between employees, among other things.
While reinvesting in your business is great (and necessary), make sure you’re sitting on enough cash to handle problems that may arise.
While your business insurance policies will cover the disasters and catastrophes, it’s always advisable to have liquidity available for when you really need it.