Many business owners get their first taste of serious profit and start becoming complacent and lazy. It’s easy to give in to temptation when you see your account balance doing things you never imagined it to be capable of before.
But this is a big mistake. Any serious entrepreneur worth their salt knows to look into the future when deciding to reinvest their profits. Splurging is a serious mistake you will eventually come to regret.
So what are the best ways to spend your money? According to small business accountant BrooksCity, here are some simple, safe, and smart ways to reinvest your money that will help you in both the short-term and long term.
Invest in Marketing and Advertising
Marketing is more important to small businesses than it is to big businesses. If you run out of clients, it’s all over.
Big businesses have massive emergency funds and methods of generating money in a pickle that no small business can ever emulate.
Your presence is only as big as your marketing budget. This is even more important if you’re in a saturated market since you’ll need to run as fast as possible simply to stay in place.
The moment you stop your marketing, your competitors win. Don’t jump into social media marketing and influencer advertising just because it’s trendy, either.
Your approach completely depends on who your target demographic is. Television and newspaper ads aren’t obsolete, they’re the right fit for certain audiences. Just like digital marketing and online advertisements target a different kind of customer.
Invest in Infrastructure
The most common problems a growing small business faces is a long customer waiting list and a lack of capacity to deal with bigger and more numerous customers.
If you keep your customers waiting too long they might simply jump ship to one of your competitors. You’ll eventually need better infrastructure to improve your production capacity. Better infrastructure means you can take on bigger and better projects that eventually translate into bigger profits.
Old equipment and outdated processes are also dangerous. You never know when they might break down or result in unwanted downtime when you least expect it. Invest in whatever hardware or software you need to make sure operations stay steady.
Invest in an Emergency Fund
All businesses experience periods of famine and feasting.
You simply never know what’s going to happen in the future. An estimated 82% of all small businesses end up closing shop because of sudden, unexpected slowdowns in their cash flow.
Sometimes, you’re simply left with no clients. What then? If you fail to plan for emergencies, you plan to fail. One of the most common problems small business owners face is being unable to pay for operating expenses. Deal with is more sooner than later.
Invest in an emergency fund and you won’t have to dip into your personal savings like so many failing business owners eventually have to.
Invest in Education
Entrepreneurs should always keep investing in courses and programs to hone their skills.
Training your employees will also help you stay up-to-date with the latest practices and processes.
No matter what your industry is, further education for you and your employees will result in better company valuations. It also gives you much-needed credibility to separate yourself from others in the marketplace.
Thankfully, investing in education comes with the additional benefit of helping you save on taxes as well because of the deduction it offers.
Don’t know what course to take? Business management and administration programs are always a safe bet no matter your field.
The Safest Option? All the Above
Invest in any one area too much and you’re left vulnerable if a crisis hits. The smartest thing to do in this situation would be to hedge your bets and invest in all the above.
Allocate a certain percentage of your profits to your infrastructure, your emergency fund, your education, and your marketing.
This protects you from making any single unwise decision that could otherwise end up backfiring on you.