This is a great topic, and something that we talk about for our business a lot as well. I won't claim to know all the answers, and a lot depends on what your goals and priorities are. It also depends on what exactly will give you the most ROI.
Some things we've invested in to increase our income and/or save on time and expenses:
- Tools that make us more productive or will let us offer more services. Be careful not to go too wild with this or to invest in recurring software that can be a drag on your profit. Ask yourself if this will really make you more productive or if it's just a fun tool to have. For example, we have a proposal software that has templates. When we need to write a new proposal, we find a template of a similar one we've done in the past, tweak it to the current client, and then handle all signatures electronically. This automate our proposal process and saves us time.
- Outsourcing skills that others can do faster/cheaper than we can do ourselves. Some people hire VAs or other professionals for more routine, administrative things while focusing their time on sales and growing their business.
- Hiring when we have more work than we can do on our own because of new clients and when we have the cashflow to do so.
- Marketing our business whether it's through building a professional website or some type of marketing campaign.
For building skills and investing in yourself, ask what you need to learn right now
and how much time and resources you can realistically put into it. For determining where to focus your energies both for learning and creating new products, I would recommend reading either "Essentialism" or "The One Thing." They talk about focusing on one thing and going from there.
So what's the one thing that would grow your business more than anything else? Focus on that throughout the year and you'll go farther than dividing your time and energy into lots of little things. So if building a course or writing a book is your "one thing" this year, what do you need to learn, invest in, and do to accomplish that?
As far as where to put profits, I think it's wise to build a business emergency fund to tide your business over if some months are slow. You can also build an opportunity fund so that you have money available for opportunities that come up.
If you have a business e-fund, opportunity fund, and realize that building your courses or writing a book will only cost a few thousand, then I would feel comfortable pulling money out of the business as you go and investing it. As things change or you have a new opportunity, you can reinvest your profits in the business.
Some people grow their business fast by plowing all of their revenue back into the business. We're more comfortable building reserves, investing in our business as opportunities arise, and then diversifying by taking some of the profits out of our business and putting them into the market.