If you have successfully started a business and the money is starting to roll in, then it’s all too easy to grab that money and spend it on the first thing that you think of. However, if you’re not using your money right, not only could you end up depriving your business of the growth that it needs, but you could stop yourself from using that cash to its fullest potential. Here, we’re going to look at what you should be doing with your business profits, instead.
Build an emergency fund
Just like individuals, businesses should have emergency funds that they’re able to tap into to help them cover themselves for a rainy day. If you have access to good credit you might think that you don’t need that extra capital, but it can allow you to be more flexible in your decision-making, where a little extra cash suddenly becomes necessary, and also builds some resistance against shocks into your business.
Think about what would happen if your cash flow suddenly dipped. How long would you be able to keep your employees and your relationships with vendors? Having additional capital can help you ensure that you always have some extra time to deal with a crisis.
Pay off your debts
If your business took on some debt as it was growing, getting started, or hit a rough patch, then it might seem like you’re throwing your money down a hole by focusing on dealing with it first and foremost but, in reality, you’re freeing yourself for the future.
Without debts dragging you down in the future, you’re going to be a lot more financially flexible and able to take on additional costs, and earning future profits will be a lot cheaper. Paying off current open credit accounts also means that you’re better able to use that credit in the future, as well. Taking on debt is not always necessarily a bad thing, but paying off debt is almost always the go-to move.
Make sure that you get paid too
If you have been working on bare bones to ensure that you’re able to make your business a success, then you should have a taste of the gains when they come rolling through. If you are a sole proprietor, then there is no legal distinction between your money and your business’s money, but it’s always good to keep them in separate accounts just so that you don’t inadvertently tap into the wrong pool of cash for either personal or business expenses.
If you’re running a limited company, then you might need to pay yourself in the form of a bigger salary or dividends. Pay yourself a measured amount, and be careful not to empty your business coffers into your own pockets.
Put it into personal finance planning
If you are paying yourself, then try to make sure that it doesn’t all go straight into your routine expenses. If you want to make sure that your money is working to give you the best future possible, then you should get in touch with financial advisers who can offer you recommendations on products for your retirement, investments, and wealth management in general.
Not all of your future wealth has to come from the business, you can put aside a portion of your earnings or profits, and start making your money work for itself, as well. That is the real strategy for improving your financial situation.
Bump up your marketing budget
If you want your business to keep profiting, then you want to make sure that you’re putting its money directly back into it, as well. One of the best investments for that additional capital is through more effective marketing. If you’re not currently at capacity in terms of customers or clients, then improving your marketing budget is one of the best ways to keep expanding.
This might mean simply investing in more ad spend, but it can also mean working with marketing specialists who will make sure that you’re making the best possible use of the platforms that you’re engaged with, as well as finding new opportunities for you to reach further audiences. Even investing in improving your brand or website can make a big difference in earnings in the future.
Aim for growth
You should also think about what your eventual plans for the business are, should it continue to grow and be a success. You might want to look at the possibility of scaling the business, be it with new products and services, more staff, tapping into new locales, or otherwise. If you can use your profits to open up opportunities for even further profits, then you can create the bridge to the successful future that every business owner wants.
Scaling takes planning, so take the time to understand what resources and assets you would need, and how you can start investing in them now. Just don’t start putting money into anything that’s going to come with recurring costs that you’re not currently equipped to deal with.
Consider your employees
If you do have the money to go around, then you should make sure that it goes around. Offering bonuses to those who played a role in your success wins their loyalty and motivates them to keep contributing to that success. An increase in salary can make those rewards significantly more substantial.
Increasing the benefits available to them as part of the contract or in the workplace allows you to be competitive, holding onto your employees so that they’re a lot less likely to go elsewhere. Of course, you should consider investing in them professionally, through training and further improving their skills os that they can become more dedicated and practically versatile members of the team.
How you spend your profits is, at the end of the day, up to you. However, with the tips above, you can at least make sure that you’re putting some thought into how you should use it, not just how you want to use it.
Photo Credit: Christina Morillo, Jopwell