Choosing to invest in your business is an exciting decision. Maybe you had a great year and realized new profits, or maybe you’ve realized that some process in your business could be improved for a reasonable amount of money. Whatever the case, the driving motivation is the same: you want to put profits back in your business in order to potentially earn more in the future.
So, let’s assume that you have done your soul-searching and you’ve come up with a percentage or dollar amount that you plan to reinvest in your business. Now for the real question—where should you reinvest this money to receive the greatest return?
Marketing: Bring in New Business
Perhaps one of the most exciting ways to reinvest in your business is to funnel additional funds toward your marketing efforts. This has a direct impact on the growth of your business by bringing in more revenue and, given that you know how much business your current marketing efforts generate, it’s relatively simple to estimate the impact of an increased marketing budget.
For example, if you currently spend $1,000 per month on a PPC campaign that provides you with an average of $7,000 in business every month, you can use these numbers to estimate the impact of increasing your marketing budget. For this example, if you chose to increase your budget by 50%, or $500 per month, you could expect revenue to increase by 50% or less as well.
Marketing pitfalls to avoid
Make sure that you are estimating the impact of that exact marketing channel. If half of your business comes in through word of mouth, your marketing budget will have no immediate impact on that cohort of revenue.
Think of your estimated increase in revenue as an upper limit, not as a promised return. Marketing suffers from saturation and diminished returns. That is, as you spend more, you will likely see a decreasing efficiency of your marketing spend—you can’t simply continue to double your marketing spend and expect to see the same increase to your revenue.
Hardware: Get New Equipment
Adopting new tech should be a leading contender for your reinvestment considerations. You can generally lump technology into two categories: hardware and software.
Hardware upgrades can pay off by saving your business time. That faster computer allows you to get more done in less time. An additional monitor allows you to work more efficiently. From an investment standpoint, I recommend staying away from those purchases that are more about the glitz and I try to focus on those purchases that offer more value—buying the monitor that is 5” bigger but double the price seems wasteful to me. Then again, your personality as an entrepreneur will be the driving factor here.
Software: Integrate New Tech Solutions
Software upgrades can often produce a higher return on your reinvestment dollars. The key here is to look for software that will allow your business to run more smoothly. The right software can give you (and your employees) hours back each week.
This is where PaySimple’s recurring billing capabilities really come in to play. Being able to “set and forget” clients to re-bill on a schedule is invaluable. Another potential option might come in the form of integrating your existing software, giving your business the ability to link data through various other sources (think QuickBooks Online, MailChimp or Constant Contact) that you already use.
Whatever your software inclination, be thoughtful when calculating the cost. Very often, adopting new software has additional costs in the form of consultants and trainings that you’ll need to take into consideration.
Employee Happiness: Increase Retention
Another way you might choose to reinvest in your business pertains to your employees. The current economy is quite strong and unemployment rate is reaching historic lows. This means that many of your employees are likely being approached with employment opportunities, which in turn means future potential costs for your business. Hiring takes time and money, as does training. Whenever possible, it’s best to retain good talent by ensuring that your team is content. This can generally be done in two ways: employee perks and employee growth.
With employee perks, particularly if your workforce relies on millennials, try thinking outside the box by giving your employees something that is worth telling their friends about. I have no idea what the 401k match is for most of friends, but I assure you I know which of them have company sponsored happy hours or take-your-dog-to-work days. Giving this extra bit of attention to your employees can be done at a relatively low cost to the business but can save you a ton of money down the road.
Employee Growth: New Skills
Employee growth, on the other hand, pertains to giving your employees the tools they need in order to grow in their careers. It might seem paradoxical that helping employees to grow would make them more loyal, but it’s reminiscent of the “if you love something, let it go…” mentality. Giving your employees the skills and training to grow in their careers will pay off in many ways.
Firstly, you’ll receive the immediate benefit of having a more efficient and knowledgeable staff. Secondly, you’ll be grooming someone to step into more of a leadership role, should they want to when the time comes. And who would you rather have helping you run your company? A new, freshly minted MBA off the street? Or someone who knows the business inside and out, and who has grown with you for years?
Just as there is no right dollar amount to reinvest, so too is there no singular formula for how to reinvest. As an entrepreneur, no one knows the needs of your business better than you.
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