Reinvesting in your business

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It makes sense in many respects to reinvest any free cash in your business.

Building a cash buffer for lean times is always a good strategy, but your reinvestment does not have to be limited only to this.

Putting aside profits is the most effective way to stave off a crisis in the event of unforeseen circumstances cropping up. It’s also a great way to reduce your stress. Such money should ideally be placed in an interest-bearing account, such as a money-market account, that gives you some flexibility in terms of how quickly or easily you can access that money in case of a cash emergency. This type of proactive cash management will also help you to demonstrate prudent business sense to potential funders or business partners.

Improve efficiencies that will increase your productivity, and thereby profitability: This could be in basic business equipment that allows you or your staff to be more productive - whether a faster computer, printer or software. Such reinvestment is in the long-term sustainability of your business.

Invest in yourself or your employees through training: This could be to increase your knowledge or understanding of an aspect of your work, or in an area, you would like to expand into but currently, don’t have the expertise.

 

Consider activities that add value to your business and brand: This could be in marketing activities that will bring in new business, or in freshening your brand or packaging if you’re in the product business. These last two activities should always be undertaken with a portion of your profits once you’ve squirreled away the bulk of your cash into some form of long-term savings. Business, by its very nature, is unpredictable. By adopting a responsible attitude towards your cash reserves you should be able to ride out any hiccups. Once you’ve reached a point where you have your future secured against unforeseen crisis you can start considering taking additional profits out by way of dividend payments to yourself or business partners. You will also know you have the right business partners if they recognize the importance of building a buffer instead of demanding that profits be paid out to shareholders.

Key takeaway: Business survival is about being able to ride out the lean periods by having managed your cash resources prudently. Plan for the long term by being responsible in the short term.

 

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38 comments
  • Let me try that again www.tufcom.co.za
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  • Hahahaha where did Thayn Disappear too?
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  • night gents...us eastern cape peeps got places to go people to see! Nice chatting... keep well Gareth you to Mike
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  • fortunately the shop door was open for my exagerrated exit!!
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  • Thank you for your interaction and will be calling on your help soon
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  • So the one thing I have learned is that business cycles come in waves you are never too sure how deep or how strong they will be and one thing I have learned is surround yourself with great swimmers who can help you. And of course a trusty life boat would be nice
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  • I Have mentored quite several young start-up entrepreneurs over the years and one of the biggest comments I have received over the years when I suggest that they reinvest in their businesses is always that they do not have the money to re-invest. I have 2 comments regarding this…. First if you do not have the Finances to re-invest in your business you clearly have a cashflow issue! What is it and how can you solve it? And the second is… Do you really need cash to re-invest in your business? Is there anything you can do that only requires a bit of time effort and legwork? A few other suggestions on investing in yourself that I have would be reading… read books that motivate and inspire you to get out of bed in the morning and excel and being an entrepreneur… read books that teach you and help you achieve your goals and objectives and that help you master your chosen industry. I am also a massive fan of Ted talks Ted Ed documentaries and videos that inspire and motivate me to succeed. Exercise it is amazing how much better you feel and how much more effectively you deal with the stresses of entrepreneurship simply by getting regular exercise and living a healthy lifestyle. To coin Richard Branson make time for an inspiration vacation get out of the city and away from the distraction and work on your strategy sometimes you just need some time away to re-ignite your passion for your business! Take time to Network Find a Mentor. Educate those around you about your business… they may just become your best marketing tool.
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  • Very well put... Invest is not always a financial term or commitment
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