The question is, what should you be doing with your business profits? As you might expect, there are several options you can consider. Some people may prefer not to withdraw any profits from their businesses, especially if they got a day job that covers their expenses.
If you’re unsure what you should be doing with your business profits, take a look at these helpful suggestions for some inspiration:
Pay Yourself a Salary
Are you running your business on a full-time basis? If you have no other income source, it makes sense to pay yourself a salary. How you do so will depend on your business’s legal structure and whether or not you are running it with other partners.
For example, if you own a corporation, you can pay yourself and other shareholders dividends. How dividends work is that each shareholder gets a share of the profit, depending on their shareholding.
It works slightly differently with LLCs; each “member” of an LLC receives draws and distributions, and they get paid in much the same way as with dividends in corporations.
Buy More Stock
If your business sells physical goods, you will undoubtedly need to keep replenishing your stock. Of course, if you can only buy minimal volumes of stock due to limited cash flow, you can increase your spending power by using some of your profit to buy more stock.
As you can appreciate, more stock means you can sell more items, and more sales equate to more profit! Plus, you can potentially boost your profitability by negotiating better wholesale prices if you purchase larger volumes of stock.
Invest in Your Business
Another idea is using some or all of your profit to invest back in the business. For example, you can upgrade your machinery or equipment to the latest models and boost your firm’s productivity and efficiency.
You may even decide to use some of the profit to hire more talent in your business and help accelerate your company’s growth. If you are outgrowing your premises, it could even be a good idea to use some of the profit to move to larger ones elsewhere.
Increase Your Marketing Budget
It makes sense to find ways of speeding up your business’s growth. One proven way of doing so is by having a large marketing budget. Using your company’s profit, you can increase your marketing budget to attract new customers to your brand.
For instance, your budget may now allow you to create some TV and radio commercials aimed at your target audience.
Conclusion
If you’re at a loss for what to do with your profit, the above examples will give you some great ideas that will help grow your business and boost your brand awareness.