Turning a profit is one of the most satisfying events for a young business, and helps to fulfill its mission to increase shareholder wealth, albeit you or outside investors. The fruits of your labor are sweet, but need to be dealt with accordingly. One should start by looking at how profitability came into account. Was it through slow, diversified client growth, or are your revenues with one or two big clients. Regardless, but especially in the case of a small number of clients, working capital should be the first place you want to look for stability.
Take a look at your current ratio (current assets divided by current liabilities) and make sure your cash or cash equivalents cover at least three months of current expenditures. For example, if your monthly current liabilities are $1,000, have at least $3,000 in cash on hand, thus giving you a current ratio of 3:1, which is good. Anything much more in liquidity should be used for growing the business. Now that you have short-term stability in the form of working capital, you can look at reinvesting your newfound profits back into the business.
Business improvement. Improving your company’s infrastructure, in terms of its computer hardware and software, is one of the best ways to increase efficiency and, in turn, your business profits. If you’ve had to settle for less than top-of-the-line software programs, laptops, desktops, cell phones or tablets, this could be the ideal time to upgrade. The better equipped your business is to work reliably and at top speed, the better service you can provide to your clients.
Invest in marketing. Many small business owners do what they do very well, but have neither the time nor the knowledge needed to figure out the best way to tweak their online presence, or to initiate or expand on an effective marketing scheme. Take advantage of the people who do this type of work for a living. There is no shortage of places like Fiverr.com or Freelancer.com that will show you just what you need. Market back to your current clients who have helped you get where you are. Investing in a little “face-time” with your customers is a good way to solidify current relationships, and to renew their enthusiasm for everything you have to offer.
Hire new staff when needed. The classic image of the entrepreneur is that of one juggling multiple tasks at once. Recognize when you need help, and ask for it. New hires can provide the technical skills and know-how to keep your operations running smoothly. This is one of the best investments you can make in the long run.
Continue educating yourself and your staff. While it is difficult to determine an ROI for continuing education, it is something practical that will allow you and your staff to become more expert in your line of work, and will often present new tangents in which the business can grow. Surveys show that a majority of those who create start-ups have little or no actual business training. Classes on management or basic business operations can be invaluable for people who don’t come from a formal business background.