One of the first things you must understand about starting a small business is that it will take 6 months to 1 year to start making a profit. When you do start making more than you’re spending, you should do more than celebrate. Explore the options to invest profits back into your business.
For small businesses in or near Cincinnati, Orcutt & Co. is here to help you with the financials of your small business. We specialize in day-to-day accounting and bookkeeping tasks, as well as manage your payroll and help you with filing your taxes when that time comes.
While consistent profits do mean that your business will be sustainable, you can’t sit back and relax. Instead, you need to ask yourself where you should invest your small business earnings to grow your business.
Investing Your Earnings in Your Small Business
Below, we’ll explore 5 ways that you can invest your profits back into your small business:
Enhance Your Business
When you’re just starting a small business, you will need to make a few sacrifices to reduce your costs until the business can stand on its own. One way that you can improve your business is to reinvest earnings.
Take some time to evaluate your financial situation and create a strategy to invest a percentage of your profits to:
- Bring in new equipment/infrastructure
- Improve customer experience
- Streamline processes
In the long run, these essentials will increase profits and allow you to expand your business.
Set Aside Savings
Another way you can invest your small business earnings is to save some. This may not seem like a good strategy because inflation will eat away at it with little to no return from interest rates. However, the point is to build a cash reserve to cover things that come up in the future.
When you have cash in the bank, it’s a lot easier to access money because you will be borrowing from yourself to cover the costs of unforeseen expenses and unplanned projects. If you need to quickly get your hands on a loan or must pay high interest payments, savings can prevent losses.
Marketing is a great way to expose your business to the public and also grab the attention of potential customers. Sometimes, small business owners wait too long to do this, so they are not able to grow their clientele. If done properly, marketing can significantly increase your business. It boosts your ROI by increasing lead conversions.
Consider investing in:
- Social media marketing
- Direct mail
- Content marketing
As your business begins to grow, there’s more to think about and do. Instead of trying to do everything, consider hiring employees to take care of some of these things.
Hiring new employees can increase your chances of success because they bring in their own technical knowledge and skills to ensure things run smoothly. Build an exceptional team and increase productivity by investing in employees. Be sure to set up a business culture that is motivating to your team and invest profits into things like:
- Employee benefits
Invest in Yourself
When your business does start making more than you’re spending, consider investing in learning more about running and growing your business. This will help you ensure that your business keeps growing and you continue to make money.
To keep people from taking advantage of you, consider taking business management classes- especially if you don’t have a background in management.
Investing business profits can help you grow and expand your small business. Some ways you can do this include investing in yourself to improve your skills, hiring employees, marketing to grow your client base, and investing profits to enhance your business. Finally, set aside some profits to build up a cash reserve.
If you have or are starting a small business in or near Cincinnati, hire Orcutt & Co. to help manage your finances. We are a third-generation small business specializing in day-to-day accounting and bookkeeping tasks, as well as payroll and tax prep.