The Money Mustache Community

Learning, Sharing, and Teaching => Entrepreneurship => Topic started by: Genevieve on March 03, 2017, 12:58:05 PM

Title: Mustachian way to invest in your business?
Post by: Genevieve on March 03, 2017, 12:58:05 PM
Question:
How do you best use your business income? How much do you reinvest in your business, and how do you think about it? How much do you invest in your personal portfolio? How much do you invest in growing your skills?

Details:
I've recently started a business providing freelance services to other business owners.

Long-term, the plan is to use this income to invest in more scalable business models that don't depend on my time. Since I already sell my knowledge, I'm considering a book or other information type products. I'm also considering real estate.

I have about $4k of revenue every month that can be put to use. What do you think is the best way to approach a situation like this -- how much to send to my investing portfolio, how much to use to invest in myself to grow my skills, and how much to use to invest into starting this more passive business?

I'd love to hear how other Mustachians think about reinvesting in their businesses.
Title: Re: Mustachian way to invest in your business?
Post by: pianomom on March 03, 2017, 03:39:22 PM
My first question is do you use any of this income for living expenses and depend on it, or can you cover your living expenses through another job?
Title: Re: Mustachian way to invest in your business?
Post by: Genevieve on March 03, 2017, 05:50:02 PM
My husband makes more than enough to cover our living expenses, so this is all for investment.
Title: Re: Mustachian way to invest in your business?
Post by: pianomom on March 04, 2017, 02:29:22 PM
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:

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.
Title: Re: Mustachian way to invest in your business?
Post by: Genevieve on March 05, 2017, 07:09:05 PM
Thanks so much for your thoughtful reply.

My actual business expenses necessary to run the business are very low - $500/mo or less including a coworking space.

I think you make a good point about the limiting factor being whether or not you personally have the energy and attention to devote to it.

I'll take a look at the book you mentioned, but already I know the one thing I'm super excited about trying right now is investing in real estate. It'd be life changing for our personal finances, and it could be another area of expertise for my existing business as well.