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What To Do With Year End Profit At Your Small Business

What To Do With Year End Profit At Your Small Business

Update: 2019-04-17
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Are you a small business owner who's unsure how to spend your most recent profits? While it might be tempting to use all that money to pay off any outstanding debt, you should also consider setting aside some of your profits and reinvesting them back into your small business. In episode #149, Gene Marks and Elizabeth Larkin offer several suggestions on how small business owners can put their profits to good use.







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Executive Summary

1:06 —Today's Topic: How Should A Small Business Owner Spend Their Year End Profits?



2:13 —Small business owners need to understand that having too much cash in their business is not a good sign because it lowers their return on assets. In general, you should only have four to six months' worth of cash on hand.



3:28 —Ideally, you should be setting aside a portion of your profits for the future. You can invest this amount in a 401K, an SEPP (Simple Employer Pension Plan) or a personal IRA.



4:39 —While paying off your debts is never a bad idea, keep in mind that interest rates are currently at an all-time low and you might be better off reinvesting your profits back into your business.



5:45 —You should spend your excess profits on either capital or investments.



8:04 —Don't pay off your debt if it's less than six percent in interest because you can actually invest your money in something that could generate even greater profits.



11:22 —Gene observes that while the business world still has a long way to go before it achieves true gender quality, female entrepreneurs now have significantly more opportunities.

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Transcript

Elizabeth: Hi Gene.



Gene: Hi Elizabeth.



Elizabeth: Today's question is from Lori in East Hampton, Massachusetts, and she owns a machine shop. And her question is, my husband and I own a machine shop, and we also own the building it occupies. We have a lot of debt with the bank from both the business and the building, and if we have a profit at the end of the year, what should we do with it? Should we pay off as much as we can on the building loan,
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What To Do With Year End Profit At Your Small Business

What To Do With Year End Profit At Your Small Business

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