For most dedicated business owners, when profits begin surging and you spot success on the horizon you are faced with a choice. During this period of growth, you must decide where to allocate funds in order to optimize resources and enhance your business’s future financial achievements. Do you take the earnings and distribute them to the business owners? Or do you continue to circulate the money by reinvesting back into capital investments?
Wondering about the right move for your business? Here are some advantages to reinvesting.
1. You avoid debt. Often businesses take out loans or lines of credit to gain a foot up on cash flow. With money to reinvest in your business, you begin to build equity and veer away from debt responsibilities.
2. You increase ownership opportunities. If you fund your business by investing directly into the business rather than turning to external equity, you avoid diluting your ownership or control rights.
3. You get a confidence boost. Once you decide you want to accrue external investments, it can be hard to persuade other companies to invest in your business. A great way to encourage outside sources to commit financially is to show them that you have done the same.
If you're contemplating where to spend additional business revenue, reinvestment is a great place to start.