The How & Why of Reinvesting Your Profits In Your Business
During the past 18 months of the Covid-19 pandemic, we have heard the stories of financial struggle, economic decline and the loss of many businesses and jobs. However, there are also some businesses that have seen their finances flourish through additional sales and services as a result of the pandemic. Think of cleaning products, food delivery services, personal protective equipment and even toilet paper! Another often unexpected result of the pandemic was many businesses saving on costs such as food servers. The take out service has meant a lesser need for as many staff saving some businesses significant costs.
So what should you as a business owner do with your small pot of savings? Should you pay yourself a big bonus for working through the pandemic and hope that all goes back to normal soon? The problem is, we don’t know what is going to happen after the pandemic. Will business return to normal? Sure, in some cases, but in others, there could be long lasting effects. People have learned to cook at home, spend more time with family, find free things to do, workout at home etc. In making these changes to save on monthly expenses, some people will be resilient to going back to their old ways. As a business, you should consider this possibility.
The finances you have saved during the pandemic could be the buffer you need to get you through the early stages of the slow transition back to traditional business practices.
What should you do with your pot of gold?
Well any business that has grown, has done so through self-investment of its profits. Not investing in your business is like sitting down in the middle of a race because you are ahead. Competition continues and businesses that fall behind through not investing in their continued success are choosing a path of eventual defeat.
Knowing what to invest in will depend on your business and its stage of growth. Here are some smart self-investments ideas for you to consider:
Keep up to date
You can and should always invest in updating your business. Businesses that stay up to date with the latest technology remain at the forefront of their niche. Updating can involve many aspects of a business.
Updating your website through SEO, building a more attractive website, adding online sales to your website or simply building a website to represent your business.
You could look at some current trends like paperless ordering through tablets or cell phones and possible developing an app
Environmental changes to make your business more eco-friendly
Invest in software to make running your daily business faster and easier such as stock management, financial bookkeeping etc.
Updating decor in brick and mortar locations is always a good investment if being modern is part of your theme
Update your infrastructure e.g. if you are a processing plant, perhaps some automation would improve production times, upgraded equipment, larger capacity equipment, storage facilities etc. One thing to research is if upgrading equipment is actually beneficial to you and your business. Otherwise you are spending money with no return.
Invest in Your Employees
It's a cliche but a true cliche that a happy worker is better for a business. Less staff turnover means less training, experienced staff means less mistakes and happy employees means less absenteeism. How can you invest in your employees? Well, think about how their work day could be made better. This could be small things like a coffee machine in the employee’s break room or large things like a team building event. Either way, it makes employees feel appreciated and builds worker relationships.
Invest in Advertising
Advertising is usually part of most client based businesses. Many would argue one of the most important investments you can make. The simple fact remains, if nobody knows you exist, they won’t come to you. How can you advertise? Well, that topic is beyond the scope of this article but some types of advertising to consider: flyers, newspapers, radio, television, google ads, social media ads. Pick which may work best for your business or hire a professional. Another type of advertising, which overlaps with upgrading brick and mortar appearance is a sign. Don’t forget if you are in a public location, a new eye catching sign can bring customers right off the street.
Find out what isn’t working
If you aren’t sure what aspects of your business need help or where you are failing, invest in surveying your previous and current customers to get feedback on your business. If repeat business or word of mouth referrals can benefit you, you need to know what opinions your customers are leaving with. Why is this an investment? To survey customers, you could hire a company to do it or provide some incentive to customers to provide feedback. Incentives are often discounts or free services/products. The loss of profits due to the incentives is the investment. You may be very surprised to learn what parts of your business customers did not find good, however, you will know exactly what to focus on improving!
Pay off Your Debts Early
If you have a financial debt in your business and it is accumulating significant interest, it could be worthwhile using your profits to pay that off as much as possible. However, the opinion on this option for self-investment is questionable. Why? Well, if $1 of debt is resulting in an additional $0.50 interest of debt, but a $1 investment in advertising is resulting in generating $2 of profit, the clear answer is to invest that money in advertising. Paying off your debts early is really best for profits above and beyond others mentioned here unless you have a debt that has very high interest. If you are unsure, consult a financial advisor or business coach.
Expand
A simple word but not always so simply achieved. However, expanding can be accomplished in many ways and does not require new locations with heavy investment & risk. Cost effective methods could simply be moving sales to include an online platform such as shopify or etsy. You could broaden your product or service range to see if they appeal to existing customers and potentially bring you a new customer base.
In Summary
No matter which area you invest in, if done correctly, the return should be even more significant than the investment. Do your research, check out the competition and survey your customers.
Make sure you would be a customer of your business if someone else owned it.
Do you need a fresh perspective on your business operations? Contact Business Coach David D’Silva and find out how to make your business and life what you want it to be.