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 growth is a good plan when the market you are in is expanding and competition is fairly low and you want to lock in more market share before competitors catch up and take it for themselves. Watch out for "growing yourself out of business" due to low marginal profit
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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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Replying to @BeigeShiba
If I had to guess, this is the number one failure point in small businesses that need a lot of knowledge. I’ve watched a couple fail myself because they refused to keep good employees.
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Same here. I've also seen some be in a really good place, invest in productivity improvements, go "shit, we have excess capacity now", commit themselves to very marginal growth opportunities that caused them to be overexposed and fucked royally by a market downturn.
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