|how to take out profit from an expanding business|
confused whether I am doing right or wrong
I have come to a strange situation in my life. I have been doing a business for the last 3 years. I have increased my business size much more than what I started for example, I started by buying credit from companies and pay them after three months in installments. Then my purchase capacity was only one lot a time.
Now I am buying all cash from many companies. My purchase capacity is 4 lots a month now.
Currently, I am branding my products, and working on extending and expanding the business. The problem I am suffering from is that I am always hand to mouth. I don't have money to buy a few good shirts :D however my cash flow is huge.
I am expanding which of course needs more money, so I guess my all profit is going in investments. But I am confused. Am I doing right? because for the last three years I have not taken out any money from my business for personal tasks, like buying a car or property. Sometimes I think I am working for nothing. Is it true or what I am doing wrong or is it normal?
I want to know whether I am a loser or a winner or just a sucker lol ... please share your wise words.
A lot of businesses start that way, riding 100% on the founder's sweat until it gets momentum. That's normal. But it's not sustainable. At some point along the success curve you need to stop re-investing every penny the business earns, and put some in your pocket.
If your profit isn't high enough to do that, then you need to raise prices, increase the margin, lower costs, or whatever it takes.
Lots of people are successful, busy, and broke. Don't be one of them.
If a business can't be successful AND earn a profit, then it's a failure.
Unless your business is rescuing drowning kittens or something with a non-financial motive. Then it's not a business, it's just a complicated NFP hobby and you should apply for charitable status for the tax benefits.
You own the Business -- not the other way around!
that's a good reply I say, as I wanted to hear something like that BUT let me explain my situation a little more-- if I stop reinvesting whatever I make, I am scared to go towards a failure OR I guess I am getting success with my new investments and it might be pushing me to think that if I stop reinvesting I will be not earning what I can with extra investment ultimately making it a loss.
to explain further, recently I started selling Product XYZ. In start I bought only 150 pc of it. I got good response and I started buying more and more regularly. Recently, I ran a full lot of the same container. Which is a seriously huge investment itself. Besides, I paid out $60000 debt I had of a company in starting days of my business. You see you cannot find your line of success from day one. same happened to me, i evolved with the time towards perfection. Now I know what I can buy and sell. In start I made some bad decisions. I still have some items from starting days in my warehouse. So imagine from where I paid the debt. I have opened a new branch as well. which is doing great for a started. Now I need more money for branding of my products. If I stop to buy this HUGE investment item then I think i will destroy my all efforts of the past three years by creating a momentum and then stepping back. If I do not stop it then of course I need more investment. Similar is advertising. I have to start advertising my brands to get bigger market share...
Now the big confusion is that if I keep expanding business and setting new goals, I will remain as I am now. As on every new turn I find a new successful line and then I need money to follow it. If I stop doing that, I might collapse because of stopping my growth rate. This fear of failure is a nightmare, I have worked my butts off in these last three years :)
If you're doing things right, some day - I can't tell you when that day will be - you'll look in your accounts and realize that all your bills are paid, all your ventures are funded, and yet there's a pile of earnings in there too.
That's when you pull some out and take that trip to Tahiti you've always wanted. Or that dream home and a midlife crisis sports car. Or you sink it into some retirement investments, sponsor a junior league baseball team or give half to a charity. Whatever turns your crank.
Be proud of your success. Keep nurturing it and reinvesting into it and grow it until you're fabulously wealthy. But above all that, balance work & life so you enjoy simple pleasures.
And if you need them then for heavens sake go buy yourself some new shirts. Look sharp!
you know, I don't know you well but I will never forget you. you have given me a fantastic reply. it not only boosted up my moral but cleared my vision too... in fact my growth is my saving... i was failing to realize that... and yes I need to balance work and life... :)
Thank you very much!
Its sounds like you are pursuing market share over profitability (knowingly or unknowingly) as a business strategy.
I would look at how you exploit the IPR you have without increasing costs, but hard to advise without knowing your business
My advice, get some good advice quickly, get a chairmain on board or mentor who can advise you on future planning.