When your business begins to turn a profit, there’s still plenty of work to be done. For your business to continue to grow, you’ll need to start reinvesting the profit back into the business. Below, we’ll explore what reinvestment is and four areas of your business that might need a financial boost.
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What is reinvestment?
Reinvestment occurs when you take your net profit and funnel it into activities and expenses to increase the value of the business. For example, one form of reinvestment would be taking your money after overheads and expenses have been paid and spending it on additional office space to grow the business.
Expansion
One main area where you can reinvest your profit is on new hires. By expanding your team, you can bring in additional expertise to help the business grow. On top of this, you can use this reinvestment to retain your top talent and keep them from taking external offers.
Marketing
Marketing and advertising can help spread awareness about your business. A well-coordinated marketing campaign can potentially see you take up a larger market share as you welcome new customers on board. You can boost your marketing department by reinvesting profits into their budget. This can lead to a more efficient focus on SEO, content marketing, Facebook and Google ads and email marketing.
Equipment or tools
Reinvestment into equipment and tools can also boost your business. Regardless of the industry you’re in, there are always technological improvements you can make. For an education technology business, this might mean that you invest in smoother software for your business. Meanwhile, if you’re running a construction company you could start researching new industrial equipment suppliers to get better rates and better quality of tools.
Cash buffer/safety net
Alternatively, you can reinvest to safeguard your company’s future. This can be achieved by saving the profits as a cash buffer to keep the business afloat during difficult times. For instance, if your revenue tumbles during a recession or a pandemic, you’ll still need to pay your rent, salaries and any other supplies. However, by putting aside two or three months’ worth of overheads, you can have peace of mind that you’ll have a safety net in the worst possible scenario for your business.
Reinvesting in your business can be an exciting moment. You can suddenly grow your business with new equipment, new staff and stronger marketing campaigns. Meanwhile, if you want to safeguard the future of your business, you can do this as well by investing in a cash buffer. Ultimately, any of these options can strengthen your business and take it to the next level.
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