Business is not free, it has costs. You need money for the initial investment.
You do not need a lot of money to start a business, but obviously the more money you have, the better. However, the secret to business success, is to reinvest in a business that has the capacity to grow.
The Secret is Reinvestment
Redirecting a portion of the profit back into the business can help your business grow and position itself for long-term success. Most new businesses need to reinvest a lot, because they have difficulty competing at the same level as established businesses or companies.
This reinvestment is not just about money, you can invest your time and more of your effort. I once applied for a loan that amounted to two months of my salary as a consultant and instead of having to go to work, I stayed home to work on my business, on my website, and wrote about 200 pages of content. If it weren’t for that investment, I would never have had the time to write those pages that are already bringing some return. I used the money to cover all my monthly home expenses and to pay the people that work for me.
See the story of how Warren Buffet, the 3rd richest man in the world made his fortune:
” One of his early investments was in high school, when he and a friend bought a used pinball machine for $25 and installed in a barbershop. The game proved to be popular with the barbershop’s clientele, so the entrepreneurial duo reinvested their profits to buy more pinball machines. In time, they had eight machines in several shops.
Eventually, they sold their venture, and Buffett used his portion of the proceeds to buy stock and then launch another business. By the time he was 26, he’d accrued $174,000 — or $1.4 million dollars worth of value in today’s market.”
Another random example of reinvestment is Kyle Taylor
- 2011: A year after I launched The Penny Hoarder, the business brought in about $55,000 through a combination of affiliate ads, Adsense, and sponsored posts and links. That year, I recognized that driving traffic to the website would be crucial to making money, so I made my first big investment in the site: a $20,000 redesign.
- 2012: The business earned $111,000. Again I reinvested half, spending heavily on traffic-generating tactics like advertising on Facebook and Outbrain, sponsoring contests for readers, and another redesign.
- 2013: This was the year the business really started taking off, and we brought in $216,000. Once again I reinvested heavily, hiring freelance writers to beef up site content and developers to improve infrastructure and design. I also continued to purchase ads to drive traffic, and spent more on tools like website hosting as the readership grew.
- 2014: Last year, all of those investments began to pay dividends when my one-employee company brought in $3.2 million. About 75 percent of that revenue came from affiliate advertising, so I continued to invest in driving readers to the website, spending a total of $1.8 million on ads. The majority of that spend was on recommendation engines like Taboola and Outbrain, but near the end of the year I transitioned almost entirely to Facebook ads.
- 2015: This year, we’re projected to bring in about $10 million. You can bet I’m reinvesting half, spending on development, design, Facebook ads, and a new mobile app, as well as editors and writers so we can continue to offer top-notch money advice.
A common investment is obviously in Marketing, but Marketing is a complex science that we will learn shortly.
Most of the time the only way to make 100,000 is to invest 10,000 and the only way to make 1,000,000 is to invest at least 100,000.
However, it is important to know that not all businesses are created equal, every business takes its time to mature, some industries are more difficult than others. If possible, especially if your business is taking time, you must diversify, have at least 2 businesses grow in parallel, you may even be surprised, because the business you least expect can be what works.
What will happen if you do not reinvest?
Your business will not grow or will grow very slowly and you will continue to earn more or less the same money for a long time, without ever having more than enough, and this can happen until the end of your life. The pain is that you will meet someone who started just as you and is in the same business with the difference that thanks to this person’s investments, he will expand, open new branches, buy new vehicles, advertise on TV while you continue as you have always been.
Stélio Inácio
This text is part of the book Escaping Poverty – 5 Steps to Start your Own Business