- A third of the 300 owners of small businesses said they believed this. The fourth quarter was the most profitableYear.
- Alleyoop founders invested 100% of holiday profits back into their personal-care business.
- David Manshoory, cofounder, and business experts discuss how entrepreneurs can reinvest holiday earnings.
One-third of 300 small-business owners polled Kabbage, a financial-tech companyThe The fourth quarter was the most profitableThe year. Some entrepreneurs may be able to make more money by investing in their businesses after a surge in profits.
David Manshoory cofounder of the personal care brand said, “As an early stage brand, 100% goes back into the business.” AlleyoopThe company sells skin-care products for beauty and body such as bronzers, toners and razors. Manshoory founded the business with his wife Leila in 2019. “We’re seeing quarter over quarter growth, however Q4 is always our biggest quarter.”
To fuel growth, the pair put all they earned back into their business. He suggests that you look at the most important issues in your business and continuously analyze how they function when deciding where to reinvest seasonal earnings. They are focused on research and development, team building, and inventory.
Chase Ink’s general manager Jenny Shum told Insider via email that “the growth stage of a business plays an important role in how business owner reinvest their funds.” However, it’s crucial to be deliberate about how and where money is reinvested.
She said that small business owners had to rethink how they did business in the past three years. “Business owners will invest heavily in technology this year to support their businesses, cut costs and improve efficiencies to combat ongoing economic pressures.”
Insider spoke to Shum, David Manshoory and two other experts about four specific ways that business owners could reinvest their profits for the future.
1. Inventory
Alleyoop
Inventory is not limited to the stock on shelves. Manshoory stated that inventory can include what’s being purchased and how it will be shipped to customers.
The first thing business owners need to do is ask: “What are our top selling products, how long does it take for shipments, and what can we buy in larger quantities at this time of the year?”
Shum stated that business owners can reduce inflation by investing in inventory, and committing to buying products at current margins, rather than allowing the market’s to fluctuate.
Cynthia Franklin, director of the NYU Stern School of Business’s Entrepreneurship Department, shared this insight with Insider via email. “Know which products or services are most important to your bottom line.” Franklin said that these are not always the most expensive items.
Tolithia Kornweibel (chief revenue officer, payroll, benefits and insurance) said that companies should continue to invest in digital strategies and services. Gusto is a support platform.
She said that many of the COVID-19-innovating businesses did it through digital delivery of services. These services have no supply-chain constraints. All signs point to the fact that we will continue to live in a digital world.
2. Research and Development
The slowest quarter of the year for retailers is the one after the holiday season. This allows business owners to be creative and plan for longer-term goals, Manshoory explained. He said that money can be used to improve product offerings.
Shum stated that more established businesses should invest in research and development because their goals revolve around diversifying their product offerings or improving customer experience.
Franklin stated that research can help founders identify the needs of their customers.
Franklin stated to Insider, “This research will help you better develop products which resonate, create targeted advertising campaigns with messages that hit all of the right notes and craft an appealing customer experiences.”
3. Marketing
Franklin stated that marketing is vital throughout the year and suggested that business owners should reinvest to attract customers.
She said, “Plant seeds now to ensure customers are ready to shop with us not only next holiday season but all year.”
Alleyoop’s marketing campaigns are constantly changing and can be adapted based on the season. COVID-19 saw the brand’s messaging shift from “on-the–go beauty” to “decluttering my routine”, for example.
He stated that any seasonal or cultural change should cause a marketing shift. It’s therefore important to have money dedicated to those budgets.
4. Team
Alleyoop
For company morale, and for customer experience, a well-trained staff can make a big difference. Shop staff will connect better with customers if they are not overworked, a fully staffed warehouse will ensure orders are shipped to customers quickly, and an array of back-end employees is needed so customers feel heard online — both through digital interactions and marketing campaigns, Kornweibel said.
Though recruiting is a major focus area for business owners, the hiring of new staff members does not mean that the company can stop investing in its employees. Shum as well as Franklin agreed.
Franklin suggested that you should make allowances for bonuses for your employees, however modest, if possible. This gesture alone will build goodwill.
Shum recommends that business owners reinvest holiday sales in retaining their team. Shum also suggests that they use cashback and rewards on credit cards to help employees receive bonuses or convert rewards into gift certificates.
Holidays can bring stress and pressure to all departments, but the seasonal success of each department can be used to rebuild them for a better year, Manshoory explained.
