Why Reinvest Your Business Profits

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  1. Your company earns $1M.
  2. You keep the $1M.
  3. You pay taxes on the $1M.

BAM!

You just lost a bunch of money that you could've reinvested and grow your company further.

Instead, you're now paying The-Tax-Man a chunk of those profits instead of empowering your organization with reinvested profits.

Why Thriving Companies Reinvest Their Dividends

Google, Berkshire, and thriving startups know that paying dividends hurts their companies' growth:

  1. You pay taxes on those dividends.
  2. You stunt your company's growth.

Instead, it's financially more effective to reinvest the profits and increase equity for the investors.

The Juice Company Example

For instance, take Jubimbabo's Juice Juicer company:

  1. His company earns $2M.
  2. He reinvests $1M before the year ends.
  3. He now pays taxes on $1M.

Instead of paying, for example, $600K in taxes, he pays $300K in taxes.

BAMBAMBABMABAMBAMBAMB.

The $300K he just saved his company gets reinvested and grows his company even quicker.

Solid free-market government systems do that for a reason:

  1. Hoarding too much of your earnings stunts the economy.
  2. So, they've incorporated incentives for you to reinvest what you earn.

Reinvested earnings grow not only the economy as a whole -- but your company as well.

It's a win/win/win/win/win.

The Caveat

This comes with one caveat:

  • Reinvesting in things that depreciate: Bad.
  • Reinvesting in things that appreciate: Good.

For instance, it's much more likely that spending:

  • $X on a truck will depreciate your equity
  • $X on a salesperson will appreciate your equity

(Equity -- the value of your company's piece of the pie; what it owns.)

So, be on the lookout for good folks, good tools, good plans, good X that you can reinvest your earnings and soar like a coked-up ostrich that just found out he impregnated a turtle while drinking his juice in the hood.

Reinvest.

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Posted on September 17

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