5 Ways to Reinvest Your Company’s Profits

Your company is making money! Here’s how to use that cash to generate more dollars in the future.

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In 2013, Nathan and Caleb Zdrodowski wanted to turn their family’s Edmonton-based berry farm into a more profitable business. That year they launched a fruit winery, but soon realized that if they wanted to make real money, they’d have to sell other kinds of alcohol.

In 2017, after Alberta changed its liquor laws, they opened West of the 5th Distillery, which sells craft spirits, like the caramelized-tasting White Lightning Moonshine and the cinnamon-flavoured Spiced Shine.

To grow, you need more clients, which means increasing your marketing, and getting more innovative and creative with your marketing tactics.

While it’s only been a year since they launched, they’re already enjoying success. “People drink spirits a lot more often than they do a bottle of fruit wine,” says Nathan Zdrodowski. “We’ve already wholesaled more this year than we did in the first five years of the winery being open.”

The challenge the brothers are now facing is what to do with the money they’re making. It’s a common problem – but a good one – for business owners to have: How should they reinvest their profits? “We do everything ourselves,” says Nathan. “If we are in a really good mood, we get a bit more aggressive with our business decisions, but right now, where we are falling short is with our production and location.”

What should the brothers, and other entrepreneurs, do with their money? Lorin Dunford, an advisor at Edmonton-based Business Link, a non-profit that provides education and resources for entrepreneurs, has some ideas.

Create a plan

Before plowing those dollars into a project, think carefully about what you want to do. Dunford suggests creating a clear business plan, which should outline your investment priorities. It’s not enough to just say you want to grow. “[Business owners often] recognize the desire to make their business bigger, but have no real, clear plan for how to go about that,” he says. “Pulling the trigger early and misdirecting those funds can kill that momentum.” It’s also important to know the end game – do you want to sell the company, transition it to the next generation, shut it down when you retire? This will also help determine how the business should be structured and positioned.

Invest in staff

One place to put profits is into hiring more staff. Skilled workers can cost a pretty penny, but if you’re making good money, then maybe you’ll finally be able to afford the superstar salesperson or technology expert you need to drive your business forward. For smaller companies, a good lawyer, accountant and bookkeeper will be required now, if you don’t have them already. “Every business owner needs to understand the numbers, but if you’re an entrepreneur and the passion behind the business, you can’t get bogged down in too many of the details,” says Dunford.

Do more marketing

To grow, you need more clients, which means increasing your marketing and getting more innovative and creative with your marketing tactics. Consider hiring a dedicated marketer – maybe a chief marketing officer – or bring in a consultant to put together a marketing plan. “A contractor can come in, really take stock, give you a diagnosis as to where the holes are and come up with a custom marketing plan,” says Dunford.

Increase capacity

Many companies use their profits to increase capacity, whether that involves creating more products, expanding production facilities or investing in technology. At West of the 5th, the Zdrodowskis’ plan is to invest heavily in developing more product. “We’re putting all of our money back into production,” says Nathan. “For every bottle of spirits we sell, we try to make two more.” Bigger and more efficient equipment, including a new boiler and a beer canner to make premixed canned cocktails, is on the purchase list.

Change locations

If your company might fare better in a different location, then invest in moving there. The brothers plan on moving their distillery operations to a nearby town to address production issues that see them paying big bucks for generators and water. “Being out on the farm is awesome, because we have all the space, but we don’t have basic things, like three-phase power, water or sewer,” says Nathan. They also plan to add a tasting room in town, which could really drive sales.

Overall, resist the temptation to disperse your company’s new-found profits to pay for owners’ salaries, or investing in the same old priorities. Use your money wisely to keep your company moving forward so it can become even more profitable in the future.

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