Brought to you by Hey Habito Ltd.:
We all start up in business with the intention of making a profit. That’s really not surprising, but what should you ideally do when your business first gets to the stage of making profit levels above and beyond what you need to get by?
You could just give yourself a pay raise, and that’s fine. However, it’s worth at least considering some of the alternative ideas discussed below to invest your surplus profits which could be much better for you in the long term.
Rather than have excess profit sit in your business account, which typically pays very little or no interest, why not look to invest in shares? There are a number of ways you can do this with various amounts of risk involved.
Essentially, the more risky investments, the better the potential returns are. There are even some specialist advisers who make investing so easy that you can have a simple online account to take care of it all for you.
Look to Expand the Business
You could look to expand your business. Are there any areas you feel that you could easily move into such as an extra service or product that you could sell or offer?
If you have a business where customers come to your store or office, then why not consider a second location? If there is the demand, then why not look to capture more of the market?
Property is almost always a wise investment. You could consider buying a commercial property if you currently rent your premises. This would offer you greater control over your own premises so you’re not at the mercy of landlords who increase rents as you get to the end of your contract.
Another option to consider is taking out a buy to let mortgage where your company is the landlord and you can rent out the property, even through an agency if managing it is too much for you.
Why not invest in more staff or staff training if you already are at capacity for your business? Having capable staff can really make a difference in the effectiveness your company’s operations.
If you offer a good working environment and benefits package, then any money you put into staff training is less likely to be lost through employees leaving to find better opportunities elsewhere.
Keep a Cash Buffer
Cash flow is king in business. You may have the healthiest business in the world on paper but it can only take a few unpaid customer invoices to put you in real trouble. Then everything you’ve worked to build can be lost by no fault of your own.
Therefore, if you have some excess profits, then it may be wise to keep a cash buffer in the business to stay afloat during any time that you’re waiting on money coming in.