By Angela Freeman
The ultimate goal of any company is to generate profits. This leads to an important question: what do those companies do with the profits they create? These 4 reasons should convince you that putting profits back into your company is a sound strategy that will improve your business’s future success.
1. It Gives You the Opportunity to Grow
Your company thrives at what it does right now, but will it continue to thrive in the future?
All companies must grow to experience continued success. When you put profits back into your company, you can use the money to explore new industries or improve on the services and products that you currently offer.
For instance, you could use the money to purchase new lab or tech equipment that will let you conduct more of your own research. That reduces the amount of money that you have to give other companies to conduct research for you. It also gives you more control over the quality of your research.
Both of these advantages will help your company succeed in the future.
2. It Lets You Spend More on Advertising
If your company is earning profits, then you know it has something special to offer clients. Putting money back into the company could help you pay for advertising that lets you reach even more consumers and businesses that want to use your services.
No matter what kind of advertising you choose, it will take a sizable amount of money. Radio, print, and Internet advertising can quickly add up to thousands of dollars.
Spending that money on something intangible might feel like a waste, but it’s the only way to get a bigger segment of your target market. If people don’t know you exist, they can’t choose your services.
3. It Helps Improve Training for Employees
Without properly trained employees, you can forget about continued business success. Every person working for your business plays an important role, so you must place an importance on making sure every person receives good training.
Good training costs money. Depending on your company’s size, you might decide to build your own HR department to handle training, or you might hire an outside contractor to do the training for you. Regardless, you’re going to need to put your profits into the training program.
In the long-run, you’ll see good results, because you won’t have to worry about employees who don’t know how to do their jobs.
4. It Means You Can Avoid the Pitfalls of Debt
Many companies borrow money when they want to expand, investigate new opportunities, or upgrade their training programs. Borrowing money, however, means paying interest. That can weigh your business down for decades.
Even if you get a good interest rate of six percent, which is really quite good, on $100,000 that you pay back within ten years, you still end up paying over $13,000 in interest. You’re better off putting your profits back into the business so you can avoid that extra expense.
What have you done with the profits your company made in recent years? Have you put the money back into your business, or have you made other decisions?