How to Reinvest your Profit as a Startup
Talking to entrepreneurs, I’ve realized that a lot of them either have a getaway, treat themselves, start another business or reinvest in a business.
The decision isn’t that simple, of course. But it’s a decision that matters much more. An entrepreneurial business community is a system of companies, employees, investors, and mentors. If successful business guys stay engaged after they strike it rich, the pool of investors and mentors stays fresh–and the next generation finds it easier to prosper.
Invest in Infrastructure and Operations
As a startup, an inflow of capital at the beginning stages of your company is essential for entering the marketplace with a viable and competitive product. That means re-investing profits into areas like: Research and development, Physical assets, including retail stores and manufacturing plants, Virtual systems vital to operations such as information technology.
Invest in Your Employees (and Yourself)
Having a great product is nice, but working with a team of dedicated and talented professionals who can help your customer base grow and your company flourish is even better. Moreover, high employee turnover is costly and can have a negative impact on company performance and employee morale. Thus, consider investing in resources and training that allow both you and your employees to build subject matter expertise, technical skills and know-how for running operations smoothly and efficiently.
To that end, entrepreneurs are also guilty of trying to wear all of the company hats. Recognize when you need help, and ask for it. New hires can provide the technical skills and know-how to keep your operations running smoothly. This is one of the best investments you can make in the long run.
Create a Cash Buffer
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.
Don’t Diversify too Early
Many budding entrepreneurs make the mistake of diversifying their investments too early in the process. 401k plans are great, but you could be using those monies to grow your business. Stocks and bonds are important, but so is building your empire. To invest your first profits, start with what you know. Noone knows your business like you do, so it seems like the natural place to start.