MOBE Diamond member Clarice Mims came all the way from New York to attend our Diamond Mastermind event in Jamaica, and I got to chat with her on the beach. Clarice wanted to know my opinion on investing and reinvesting in her business, and whether there was a clear dollar amount she should be aiming for.
The actual amount you should invest to start your business depends entirely on what you can afford, but when it comes to reinvesting profits, I say the more the better.
Reinvestment Equals Growth
Like I told Clarice, the moment your business is profitable, you should reinvest that profit into the business. It’s the simplest, most effective way to grow your business. It’s how I grew MOBE, which means it’s the reason you are reading this right now. It’s the reason that Warren Buffet isn’t still renting a video game machine to a barber shop. Reinvesting half of his company’s profits each year is the reason that Kyle Taylor, CEO of The Penny Hoarder, managed to grow his business so quickly.
In 2011, Taylor reinvested in a major website redesign. In 2012, he reinvested in another redesign as well as affiliate advertising. In 2013, The Penny Hoarder’s profits were used to hire freelance writers, purchase a web domain, and increase advertising. 2014 was a big year, where reinvestment was primarily used to drive traffic. In a span of four years, The Penny Hoarder’s profits shot up from $55,000 to an estimated $10 million.
According to Taylor, “The company’s revenue curve never would’ve been this steep had I not invested so heavily in growth right from the beginning.”
I don’t have a fixed percentage that I reinvest into MOBE, but if I did, it would be pretty high. I’m always focused on growing the business and I know the best way to do that is to constantly keep reinvesting. How much you reinvest in your own business depends completely on your comfort level.
Investing and the Importance of Patience
When you start a small business, you need an initial financial investment to cover things like buying domain names, developing your content marketing strategy, and placing ads. The more you have to work with at that stage, the better, since your first investment must trigger sales that actually bring you profit. In every business, it takes time to get a positive return on your investment, so you will need to be patient.
I remember putting on a MOBE event not too long ago that, superficially speaking, completely tanked. Only a few of the registered attendees showed up, and sales during the event were not nearly sufficient enough to cover the costs of setting everything up. Over the next couple of weeks, however, people that had attended and listened to the speakers started to show more interest in the programs I had offered, eventually converting and then bringing in sales of their own. Over the long-term, I made a profit from the event, even though it could have been called a complete failure when it ended. That’s exactly how you need to think about your initial business investment: as a long-term process.
Reinvestment Strategies That Work
As your own leads start to convert and you see money coming in, think carefully about what to do with that money. I strongly advise you to reinvest at least half of your profits into the business so that you’ll see even larger profits in the future. As a MOBE consultant, your most important reinvestment is advertising, but there are few other lucrative ways to handle your profits.
Business coach Rasheed Ogunlaru says: “Investment isn’t just about cash: Investment is also about time, effort and expertise. It’s important to be incredibly resourceful as an entrepreneur.”
With that in mind, consider reinvesting in your own training, in hiring skilled employees, or in new traffic avenues. Your primary reinvestments should go to those processes that earned profits in the first place! After that, you can get creative and try out new ideas to see how they work.
How much should you reinvest? There’s no hard-and-fast rule for you to follow, but ask yourself if you want to grow your business quickly. If the answer is ‘yes’, then aim for 50 percent or higher.