Discussion in 'Investments' started by K, Apr 2, 2015.
So guys, what percentage of your annual profits do you reinvest and what do you take yourself?
I've been really interested in paying myself a simple salary each month, letting the profits build and invest them each quarter. I would invest the money into acquisitions to make my current business have a larger market share, buy another business that compliments my current one or invest into real estate perhaps.
Essentially I would be investing at least 90% of the companies profits, especially early on in order to rapid acquire new business.
I've seen a lot of people paying themselves 100% of the profits which is insane lol. You don't have to just reinvest back into your business, but you could purchase another as well.
@K This depends on what stage my business is at, and whether I have equity partners.
When I first got started in business I was still living at home, and it was easy to reinvest every penny back into the business.
The rule of thumb for me now is that I let the growth dictate how and when I get paid. If the company if growing so fast then I even consider investing more capital. When the growth begins to slow, and level out, this is when I begin to get reimbursed my initial capital.
The only way to become self sufficient is to take what your bare bones necessity is each month. Sacrifice for the short-term, and give your company an opportunity to grow to the point where what you receive each month is a minute percentage of your revenue.
This is the only strategy that grows your business quickly, to the point where your life can change. A few months of discomfort is worth it when it means more freedom in the longer run.
I only take out the minimum I need to pay my bills, everything else is reinvested in either marketing material or new hardware.
I barely make the ends meet nowadays, sadly. I do, however, save 10% (my SO doesn't know about it) of my earnings, mainly because I want my own house in a couple of years. However, I do plan to open a power washing business soon, so let's hope I'll be able to have some profit so I can actually reinvest it.
A lot of small business owners don't actually pay themselves a wage when a business first starts and they'll obviously pay the bills, and cover expenses, but the rest will be reinvested into the company.
A lot of small businesses fail for the reason that the owner starts paying themselves a wage to quickly and I think a lot of owners don't take a long term look at things and are happy to forfeit long term profit for quick gains.
Normally I reinvest what I have left over after paying overhead. So possibly 20%-80% depending on what bills came in that month and how much they were.
I like to reinvest until a business is able to produce a profit on it's own. Then I let the funds that would have normally been reinvested sit in an interest bearing checking account as liquid in case sudden opportunities come up that I want to take advantage of.
I agree with this. It's best to let the business grow before taking a portion a wages for yourself. Once the business is profitable there will be plenty there for wages. However, in the beginning of building, the business needs as much money as possible on hand for unexpected expenses and also to pay some things in advance so you do not have to worry about them later, such as web hosting.
On my current projects I reinvest on average about 90% of the profit. The remaining goes to 5% overhead. And 5% interest accounts.
Was told the minimum is 10%.
I'd say 10% is too little to be honest but at the same time I think it also depends on were the business is in terms of growth.
If a new business just starting out sticks to that 10% figure I can't see how that can be viable when others are reinvesting up to 90%
Very smart strategy, I can understand you are big one in business fro what you say. what kind of business do you have??
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