When your small business starts earning more money, it provides you with an opportunity to reinvest those funds to keep up that growth and success. You can evolve from a bootstrapped company to one that works with a legitimate small business budget — as long as you have a good game plan.
But how do you allocate money in a way that makes the most of your profits? With endless options, you may not know how to start using your business' resources now that you have more of them. It's easy to funnel a ton of money into shiny new tech or expensive advertisements, but it may not be the best use of your funds.
Don't just throw money at the first thing that catches your attention. Focus in on the most important areas, and prioritize them in your small business budget.
Aggressively Pay Down Debts
As long as you owe lenders money, debt will drain your company's cash flow and prevent you from using your hard-won funds to pursue better opportunities. And the longer you hang on to debt, the more it costs you in interest.
Evaluate any debts your business needs to repay. Record every single balance, and list them all out in order of interest rate. The loans with the highest interest rates go at the top of the list, and the debts with the lowest rates go at the bottom.
You should include a line item for debt repayment in your small business budget and allocate a percentage of your profits to repaying the money owed. Doing so allows you to reclaim valuable parts of your cash flow once the money is repaid and frees you from financial obligations to other institutions.
Invest in Infrastructure to Reduce Costs and Boost Profits
The next area of your business that you should allocate money to is any infrastructure that would allow you to operate more efficiently (so you can make more profit). That may mean investing in software that allows you to automate more tasks and save work hours. Or you might want to invest in shipping options and other logistical solutions that cost more upfront but save money in the long run.
The specifics of your infrastructure will depend on the type of business you run and the products or services you sell. Audit your current setup, and take note of any inefficiencies. You'll want to address these and improve them with the money your business makes — so in the long run, you can operate with lower costs and earn even more.
Think About Your Human Capital
Great employees are the heart of any successful, growing company. When you draft up a small business budget that seeks to allocate higher profits to important areas, don't neglect the people who make your company operate smoothly, effectively and profitably.
There are two main ways you can invest in your staff: you can spend money on people you already employ or spend to acquire new talent. If you're happy with your current team, consider investing in the people who helped make those additional profits. You could provide better benefits and training programs that cost you a little more but create loyal employees who are happy to continue working hard for your vision. Are you short-staffed and need a bigger team to get more done? If so, it might be worth making a new hire to keep production levels high.
When you start making money with your business, invest it wisely. Spending to improve your infrastructure, your team and your future cash flow could pay off.