We take it for granted. One of the main goals of a business is making a profit. Right?
Answer this question: What makes a business more valuable? Is it profits, or growth? Or future prospects?
And then this question: Don’t you have a straight trade-off between profits and growth?
Assume you have money still in your bank account after you’ve booked costs and expenses.
- That money could be booked right then as profits.
- Or you could spend it instead on marketing or product development to enhance future growth.
Reinvesting profits really happens before the month is closed and that discretionary money is booked as profits. Once it’s down on the accounting statements as profits, it’s almost always going out of the company.
If you can, reinvest your profits before they become profits.