I am often asked to advise my clients on reinvesting their business profits. Below, you’ll learn why the most rewarding place to invest your hard-earned money is in your own business.
Invest in Yourself: The Smart Choice
Every investment comes with its own risks, but investing in your business gives you the ultimate control. By channeling your profits into business improvements, you may realize returns of 25% to 50% or more. Whether purchasing new equipment, upgrading technology, or providing advanced employee training, these investments can dramatically improve productivity and efficiency.
Retail Business: Doubling Down on Inventory
If you’re in retail and your inventory turnover is four times a year with an average gross profit of 25%, an additional thousand dollars invested in inventory can yield a remarkable 133% return.
Service Industry: Technology and Training
Investing in innovative technologies, upgrading your website, or enhancing employee skills can offer substantial long-term returns for service-based businesses. These initiatives not only enhance your operational capabilities but also improve your team members’ overall quality of life.
Construction Business: Tools and Training
In the construction sector, investing in cutting-edge tools, equipment, marketable certifications, or safety training can make your business more efficient and help you stand out from the competition.
Real Estate: Building Equity
If you don’t own the property where your business operates, consider the potential of investing in commercial real estate. Transitioning from tenant to landlord allows you to build equity, as mortgage payments replace rent payments. Many business owners who made this decision 25 years ago now find their property to be worth more than their business upon retirement.
Diversify Your Personal Estate
While reinvesting in your business is crucial, it’s also important to diversify your personal assets. At The Business Therapist®, we recommend setting aside a portion of your annual profits to invest conservatively outside of your business.
These “nest egg” funds should be allocated to low-risk investments.
By balancing your business’s inherent risks with conservative external investments, you create a more stable overall financial picture. The credit market upheaval in late 2008 serves as a stark reminder of the risks associated with external, uncontrolled investments.
Invest Wisely!
To make a significant return, the best investment you can make is in yourself and your business. For your savings outside the business, choose conservative, safe investments. This strategy ensures you achieve financial growth while maintaining a balanced risk profile.
