When you own a business, you typically have three good options for what to do with the profits: Invest for growth. Invest for margins. Build up your cash reserves.
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Investing for margins is good when the market you are in, is static or shrinking and competition is high. This can mean improving training for your staff, or modernising your tools to enhance productivity. This may mean laying some people off.
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Watch out for laying too many people off and losing critical organisational knowledge and/or growth potential. Also be wary of getting too sentimental and pursuing growth opportunities with poor marginal profit as an alternative to laying people off.
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Building up your cash reserves is really unsexy these days because saving is practically a swear word these days. Truth is, few businesses are consistently profitable and being able to avoid the shitty interest rates on short term business loans is great.
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Watch out for getting complacent and being stuck in a (temporarily) profitable holding pattern without proactive plans for how to invest for future. If you're building up cash because you can't think of anything better, you might want to hire a consultant.
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