Once your business kicks off, you’ll ideally find yourself with some excess profit. Chances are that this is more money than you ever had available before (while living off your paycheck), which puts you in front of a completely new problem – what do you do with it? Sure, you can and should treat yourself, but once this is done, you have some major decisions to make. With that in mind and without further ado, here are the top five things entrepreneurs should do with their profit.
1. Reinvest (clearly)
You can use some of this profit to strengthen your enterprise.
Sure, you’ve set aside a specific percentage of your average annual revenue to spend on marketing, but why not spend a bit more? Sometimes, a small investment of your own money can make a huge difference between a struggling business and a business that just can’t handle all of that workload.
Another thing you should invest in is technology upgrades. People need better tools to show better performance. Even if you’re not buying but hiring, look for other options, shop around, and don’t shy away from actually spending more.
Spending more money on better courses and more skilled mentors for your staff members will return to you tenfold. Not only will it make them more productive, it might even make them more loyal and more reluctant to leave. This, indirectly, saves you a fortune.
Reinvesting into diversifying your offer can be done with a small amount of capital, but it could eventually make your business far more stable and resilient.
2. Renovate their home
There are a couple of reasons you want to embark on your home improvement journey.
First of all, by renovating a home, you’re likely making it more energy efficient. This means reducing the amount of money it costs you to heat and cool down a place. This may sound minuscule compared to what you’re actually making and spending, but every dollar counts.
Robert Kiyosaki elegantly puts this as a division of assets and liabilities. Assets make you money, while liabilities lose you money. By improving your home, you’ll actively reduce the impact of one of your biggest liabilities.
Going green is also an important thing for any young and aspiring entrepreneur. Chances are that you’ll want to label your business as green at one point, and this will be a lot easier if you can back it up with a personal example.
Ultimately, as your affluence grows, you want to experience some of this increase in standard. This is what’s supposed to keep you going. Sure, you don’t want to overspend or raise your standard too high while your business is still young; however, any improvement you make on your home will remain no matter what happens to your business or income. The value of property rises, and your quality of life improves.
3. Invest (to diversify)
Reinvesting into your business is clearly the first thing you have to do, but you can’t just reinvest it all. Doing so would be putting all the eggs in one basket, and you really want to diversify. So, what you should do is invest some of this excess money.
First of all, you need to look for conventional investments like stocks, options, and futures. You also want to invest a bit toward newer assets like crypto; just make sure to consider only the best new crypto coins for 2024 that are reviewed and recommended by an expert or an expert team.
Third, you should probably create an inflation hedge by putting some money in precious metals. Gold and silver, as the more traditional options, are still the best, but even platinum and palladium may be surprisingly smart investments. Keeping 10-15% of all your investment money in precious metals (or commodities, in general) is considered to be a good move.
Another thing you should focus on is the assets that generate passive income. Sure, you can buy real estate; however, this is not your only option. Stocks that pay dividends and even IPs that pay royalties are just some of such alternatives.
Speaking of alternatives, you have many alternative assets you could invest in; it’s just up to you to find them.
4. Build an emergency fund
There are too many things that can go wrong for an enterprise. Off the top of our minds, your business could slow down just enough to cause you problems with cash flow, which means that you’ll struggle to cover the costs of your day-to-day operations. The deficit may be temporary and minuscule, but it may be just enough to run you out of business.
Another reason why you need an emergency fund is unforeseen expenses. Damage to your facility can occur as a result of a natural disaster not covered by your insurance. You could lose a vital piece of equipment at the worst time imaginable.
Sometimes, it will not even be your fault. The market can move in unforeseen ways, and these events serve as a sort of filter. Businesses that have emergency funds survive them, while the rest don’t.
So, how do you make an emergency fund? The simplest way to start is to set a target amount. Then, you need to set up a separate account. When it comes to these matters, never trust in your ability to show restraint. Physical separation of funds works the best. It’s even better to automate your savings, which means that the money will get deposited into this account even in situations where you would be hesitant to do so manually.
5. Give back to the community
Giving back is an ethical thing to do. It’s the right thing that will leave you with the sensation that you’ve actually done something that matters.
Another thing to remember is that the community that you, as a small business owner, are reinvesting in is usually your own. What does this mean? Well, you’re cleaning and fixing the park where your kids play, repairing the roads that you take to work every day, and fixing the problems of your own community.
All altruism aside, this is the community that consists of your potential partners, vendors, investors, and customers. Remember, these people aren’t always objective and calculated, even when doing business. In these scenarios, they’ll go to someone they trust, someone they’ve seen around, and someone they know is not just profit-oriented.
Overall, giving back to the community can be turned into a networking opportunity. People will accuse it of being a PR stunt even when you’re giving back from the bottom of your heart. So, if you’ll catch some of this suspicion either way, why not get the most out of it?
Getting the money is just the first of many challenges, and what you do with it after is just as important
You won’t always have excess money. Things go up and down; sometimes they’re better, and at other times they’re worse, which is why you need to learn how to use the opportunity while your profit is at a peak. Just having money is not enough; knowing how to spend it best is equally as important. So, take your time and carefully plan it all.
