You’re Profitable! Now What?
Congratulations! Your lifestyle business is profitable. Your baby that you’ve nurtured and cared for over months or years is now putting money into your pocket!
That’s incredible. Now you have some new questions to answer. Here are a few to consider:
1. How Much Profit Goes To Your Lifestyle?
You’ve got disposable income, perhaps for the first time in a long time.
Initially, I’d recommend not changing your lifestyle at all. Go out to dinner to celebrate but don’t add large recurring expenses, such as a larger apartment, just because you’ve had a few good months.
Don’t let your profits trickle away on small ‘one time’ expenses. They often become daily routines that add up.
Continue to haggle over prices. Don’t start paying the ‘sticker price’ for everything just because you have more in the bank. You’ll pay more for everything.
Expenses are concrete and lasting. Your profits may drop unexpectedly. They’re much less permanent, especially if you’re a small business with just a few good months.
2. How Much Do You Re-Invest In Your Business?
It may be best to strike while the iron is hot! Reinvesting profits for few months could explode the size of your business and how much money you are able to take home in the future. Patience is a virtue.
Conversely, you may have reached a ‘local maximum’. You’ve exploited the current opportunity and making more money from your current business may require a massive amount of learning, trial-and-error, and an altered business model. You may be best pulling money out and investing it elsewhere.
3. Do I Invest In OTHER Assets?
Do you want to diversify into stocks, real estate, precious metals, commodities, or any other assets that DON’T directly relate to your current business?
Consider that many online businesses are largely dependent on large companies like Google, Amazon, and Facebook. A Google search algorithm update can wipe out an SEO business in a matter of hours. A violation warning from Amazon can wipe out your e-commerce sales in an instant.
These are not long-term assets to invest in on a 10-20 year timeline. They generate incredible returns, but it’s smart to place some of this ‘fast cash’ into more stable long-term investments that will work for you your entire adult life.
4. How Much Do I Save For Taxes?
You didn’t accrue much tax liability when you were running at a loss but now that you’re making money Uncle Sam wants a cut. First, open a specific ‘tax account’ with your bank, and put in 30% of every dollar you remove from the business for personal use. It’s painful to see a $1,000 payout reduced to $700, but it’s more painful to spend the $1,000 and then struggling to find $300 extra after-the-fact.
Can you save money on taxes by setting up a personal IRA or a SEP-IRA in your business? Are you comfortable having your money tied up until you’re in your 60’s? Now that you’re profitable, these are all things to consider.
5. How Do I Systematize My Business?
You’re generating profits, but are you working 70 hours per week?
Can you hire freelancers to take over your day-to-day tasks? Building process documents that outline your repetitive tasks can help others take over jobs that initially you had to do yourself.
Now that you’re profitable you can hire people to help you. Ideally, you should be able to decrease the time you work while still generating a healthy income for yourself.
Tip: When a freelancer has a question, don’t answer in a private email or Skype message. Change the ‘process document’ to answer the question, and then tell the freelancer to check the document. This way, you only answer each question once.
6. How Do I Spend My Time?
Just like with financial profits, I think it’s best to start by reinvesting!
Invest in your education. Learn new business skills like high-level finance and accounting. Learn how to scale a business beyond a small-time ‘lifestyle’ operation.
Learn about investing in different asset classes. Don’t be a one-trick pony!
Maybe even learn a foreign language. (Mark Zuckerberg is learning Chinese)
Invest time in meeting other successful business owners like yourself.
Perhaps most importantly, do some long term planning. While focusing on the immediate results of your business choices, you may not have done much planning for the next 5-10 years. Now you have time (and perhaps a little more courage than you had before) to map out the terrain ahead.
Don’t Expect All Your Problems To Go Away
Becoming profitable doesn’t remove all your problems. You just focus on different problems.
Your Investments Increase – A growing business requires more and more money spent on inventory, advertising, and outsourcing. You’re now putting much larger chunks of money at risk.
Expensive Things Reveal Themselves – Once you can, you’ll want to buy things that you never paid attention to before.
Expensive Lifestyles Increase Risk – Once you start spending more, your business must continue to generate those profits. Any drop, even if well above your old income level, now means a decrease in quality of life.
Growth Is Never Fast Enough – You’ll now focus on growing your profits. This is a never-ending challenge.
You’ll Still Feel Highs And Lows – Your baseline changes, so a bad week, even if it’s a great week compared to your old baseline, can still make you feel bad. Maintaining perspective is a continual challenge.
Instability – A few profitable months are good but most businesses die out and only a few last for decades. You’re the captain of the ship and you need to stay focused.
Congratulations! You’re Profitable!
Yes, you have new responsibilities and no, your problems won’t be solved overnight, but the majority of people who go into business don’t make any money at all, so raise a glass or pat yourself on the back.
Now you can brainstorm how you’ll turn this short-term ‘win’ into something bigger. How can you stay profitable?