Reinvesting Profits: The Smart Small Business Owner’s Guide

August 17, 2021

reinvest profits

Your business is thriving and you’re bringing in profit like never before. Congratulations! But, now you’re wondering how to invest in your own business with those profits, right? You’ve come to the right place.

We are going to answer the questions, “How much should I reinvest in my business?” and “What can a business owner do with profit?”.
There are plenty of effective ways to reinvest profits in your business to help your company grow. There are also tax benefits that make reinvesting a smart decision that we will cover. 

How Much Should You Reinvest in Your Business?

This is a tricky question because it depends on your unique business goals. Evaluating your business goals and timeline is a great place to start when deciding how much to reinvest in your business. 

There isn’t a magical percentage that every business owner should use to determine what amount to reinvest in their business. However, reinvesting 20%–50% of your profits is a good range to consider. The specific amount of money will depend on the size of your business, the amount of profit you make, and your business goals. A financial advisor may be able to assist you in making this decision.

How To Invest in Your Own Business

Once you decide how much to reinvest in your business, you need to decide where you will allocate funds. Here are several ways you can reinvest profits into your small business. Review this list and see which options are most applicable to your business.

Buy New Equipment

Buying the latest equipment is one way to invest in your own business that works wonders. New technology is developed every day and some of your equipment may be outdated. New equipment can streamline processes and boost productivity, not to mention employee satisfaction. 

Expand Your Staff

Another great way to reinvest profits into your own business is to hire more employees to expand your operation. With more hands on deck, your business can produce more and scale more quickly.

Advanced employee training can also be a beneficial way to reinvest profits. Having a team of knowledgeable employees is key to growing your business.

Up Your Marketing Strategy

Marketing strategy, especially digital marketing is critical for the success of any small business. Reinvest profits into improving your marketing strategy. You can do this by expanding your marketing team, running ad campaigns, investing in an SEO agency, or trying new marketing tactics.

See what marketing methods work best for your business and drive leads by capitalizing on those methods.

Build Your Brand

In a Forbes article Luke Lintz, a Forbes Councils Member, states reinvesting profits to build your brand is one of the best things you can do. Building your brand image can result in higher visibility, overall growth, and minimal cold outreach for leads.

Consider reinvesting profits to improve your social media and online presence. In the digital age, building a recognizable brand online is crucial. 

Invest in Yourself

One option that many people forget is to invest in themselves. You have created and grown a successful business; maybe it’s time to invest in yourself. Consider furthering your education by taking classes in the industry or getting a degree.

In the long run, gaining more industry knowledge will help you to reach your business goals. You have worked very hard to make your business what it is today, so don’t be afraid to reward yourself.

Hopefully, this list helped inspire you to reinvest in your business with the profits you’ve made. Next, we will look at the tax benefit of reinvesting profits and why it’s worth doing.

The Tax Benefit of Reinvesting

There is an extreme tax benefit of reinvesting profits in your business. The profits you reinvest are considered business expenses and therefore aren’t taxable. This is a major reason why reinvesting in your own business is a smart move. 

Not having to pay taxes on a portion of your income can make a big difference in your business finances. The benefits of reinvesting are two-fold: you are improving your business and are paying less in taxes.

LendThrive Wants To Help Grow Your Business

LendThrive, part of the AVANA Family of Companies, wants to see your business grow. Our mission is to enable entrepreneurs to overcome financing challenges to achieve growth and success.

We offer small businesses fixed rate business loans up to $150K. Our fixed rate business loans are flexible with low interest rates. Get approved for a loan in as little as 24 hours and watch your business thrive! 

If you need funds to continue to grow your small business, apply today or contact us for more information.

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