Before we discuss some of the things you should do with your business profits, here are some things you should not do.
- Don’t blow your profits on goods and equipment your business does not truly need
- Don’t celebrate your gains with an expensive staff party
- Don’t abuse your power as a business owner and partake of those profits for your own egocentric needs
In terms of being ‘smart’, you should not do any of those things. Instead, focus on the following, because your business will continue to be profitable if you do.
#1: Save for emergencies
In a perfect world, there would be no need for an emergency fund. Unfortunately, we do not live in a perfect world (as the recent pandemic has shown), and a number of disasters could befall your business.
Sudden changes in weather can damage your place of business. Angry customers can sue your business with costly compensation claims. Sales may slow down for a month or more as a result of circumstances beyond your control. And your equipment can malfunction and fail at the worst possible moment.
These are only a few of the disasters that can befall your business, but as bad as they get, you’ll minimize your financial losses if you have an emergency fund. So save money every month, whether it is in your safe or a savings account, because you will not must take advantage of it in the future if a disaster does occur.
#2: Give your business a marketing push
You already know the importance of advertising your business, so when you start turning a large profit, use some of your hard-earned money to improve your marketing.
So you might pay for a specialist in web design, SEO, and other aspects of digital marketing to enhance your business’ online presence. You can even pay for radio and TV commercials, and even giant billboards to push your business offline. And you can hire more people into your sales and marketing team, because you will have a better chance of getting the word out there about your business.
These are only a few of the things you can do when you give your business a marketing boost, but there’s far more to it other ideas online.
#3: Pay off your business debt
If you have debt in your business, make every effort to pay it off as quickly as possible. The longer you are tied to high interest rates and monthly payment plans, the lower your profit margin will be.
So if you make a profit in a given month, use some of it to pay off your balance. You may want to consider refinancing as well, because when a lender sees that your business is profitable, they may offer a lower interest rate. Either option will lower your debt burden, and you will reach debt tipping point sooner rather than later. You will then have the financial freedom you need to save more and grow your business.
Etc…
Do not be reckless with your business profits. Use it wisely, maybe by following our advice. You will protect your business if you do, and you’ll experience greater profits in the future. So be wise, and resist the urge to throw a party when the money starts pouring in.
