7 Ways to Invest Back into Your Business

Your business has been thriving and the company is finally starting to make money. What should you do with your first profits? A great way to fuel growth is to reinvest into your business so that it continues making money. But what exactly does this mean?

We’ve outlined the most effective investment areas for business owners that have helped brands multiply their dollar. Here are some of your options:

Marketing

Generating money to reinvest in your business means you’re doing something right. As your brand continues to grow, you realize that word-of-mouth marketing isn’t cutting it anymore, and you want more people to lay their eyes on what you have to offer. Digital marketing is always a great way to invest back into your business and to reach new customers. The great thing about it is that your marketing efforts are measurable - which means you can monitor your campaigns and adjust your spending and strategy accordingly. Email marketing can be a great way to stay top of mind,  remind people of why they should buy your product, or close the sale by offering a discount code for abandoned shopping carts. Services like Klaviyo allow you to drive sales through highly targeted emails that can be automated and measured. You should also put some money towards improving your SEO to make sure people find you online when searching for products within your industry. Getting your website to the top of Google’s Search Engine Result Pages (SERPs) when people look for products similar to yours will certainly pay off in the long run.

Inventory

Eliminating the worry and stress of not knowing if you have enough inventory on hand to satisfy demand allows you to focus more on other aspects of your business. Investing in inventory can be a great way to make sure you don’t lose out on potential sales when there’s a sudden spike in demand. Fluctuating demand has become more common during the COVID-19 pandemic as consumer preferences have shifted and having inventory on hand will help you keep those customers that would've turned to your competitor for out-of-stock items.

If you are looking to grow your business but need to invest your profits in marketing or other areas, an inventory loan might be exactly what you need if you’re a product-based brand. These loans are backed by your current inventory and can offer brands the quick cash they need to help them prepare for the future and stay flexible.

Equipment & Infrastructure

As assets age, they become more and more costly to maintain. Rather than spending your profits on repairing old machinery, investing in new  and more cost efficient machinery and equipment can be a game changer. Upgraded equipment can reduce business costs in the long-run and increase efficiency. This could also mean that if your business has its products manufactured overseas and receives frequent complaints about its quality, it is time to upgrade to a higher quality producer, even if they cost more. Developing software or purchasing software also falls into this category if it drives business growth.

Acquisitions

As your brand continues to grow, you may find yourself in the position to acquire another smaller business that aligns with your business model. Through an acquisition your business absorbs the smaller one and you acquire greater market share. Although complex, this might be the right move for your brand at a certain point to ensure faster and further growth. An example for an acquisition is Walmart buying the digitally-native brand Bonobos in order to gain insights into its “showroom” business model, where customers are able to view products in-store but purchase them online.

Rainy Day Fund (Cash Buffer)

In business, there’s always a chance that unexpected cash flow problems may arise without warning. That is why it is a smart idea to reinvest in your business and have liquidity available for bumpier stretches of time. Especially in times of COVID-19 closures and social distancing measures changing constantly, it is wise to think ahead and put aside two to three months worth of essential expenses as a safety measure. You want to have enough retained earnings to be able to cover unexpected expenses such as:

rent increases

tax bills

defective equipment

cash flow issues

temporary losses of income

and more

Although putting money aside may not seem like reinvesting into your business, it can buy you time to recover when your business goes through a bumpier season.

Website Redesign

Your website is your business card in the online world and it is the place where potential customers gather information on what you offer and what your brand stands for. If your website or e-commerce site is not up to the latest standards or doesn’t run as smoothly as it could, customers might leave the site prematurely and you lose out on sales.Putting money towards a website redesign or upgrade can be a great way to reinvest in your business and is important for continued success and profitability.

Research & Development

Research and development is a crucial part of making sure your business is not just a one-hit wonder. There is always room for improvement. Investing in this area means you and your business will look inward and seek out ways to improve products, services, processes, technologies and more.

For example, if you have noticed that your customers are asking for something you are not currently offering, you may also want to explore new products and test out how customers react to those new offerings before launching them.

Final Thoughts

There are plenty of options when it comes to reinvesting into your business. It might be tempting for founders to rest on their laurels and use their first profits to pay back early investors, but investing in your business is the best way to continue growing your company.

When it is done with sustainability and the long-term in mind, you will likely reap the rewards of your investment in the future. No one knows your business as well as you do. Depending on your brand’s most pressing needs and available funds, you may want to consider investing into the right areas to ensure further growth.

Available capital to invest in your business does not have to be limited to money from your own profits. External capital and revolving lines of credit can be a great way to get your hands on the necessary funds to take your business to the next level. E-commerce funding for example allows you to hire and train staff, buy new equipment, upgrade your ordering and inventory systems, and so much more.