And How to Use The Surplus Wisely
A penny saved is a penny earned, and a penny invested is a penny for your future. If you want to continue to grow your freelance empire, you’re inevitably going to need to put a little cash behind that expansion effort. The question is – how much cash?
Calculating how much surplus capital you realistically have to reinvest into your business is only half the battle. You want to make sure that you’re using that money in a way that will serve your highest good for professional growth. It’s a multifaceted issue, and the answer won’t work out to be the same for every freelancer.
Calculating Your Surplus
You don’t want to put money into growing your business if you can’t realistically afford to do so. You might have landed a big job that paid more than you had expected it would, but you need to take some crucial things into account before you press forward. Make sure you are fully aware of your financial situation – keep a spending diary to determine where your money is currently going. You may need to make some adjustments to your spending habits to free up enough capital to make investing in your business a little more sustainable.
Considering Other Financial Goals
Once you have an accurate estimate of how much surplus capital you’re really working with, consider what else you might want to do with it. Reinvesting it into your business is great, but other financial goals may take priority over business growth. For example, do you have a retirement fund or plan that you contribute to? Are you working towards making a large purchase, like a home?
Consider what you’ll need to help you secure important goals for the near and distant future. There are plenty of things that you can and should be investing in – your business is only one of them. You might want to take some investing courses or learn how to trade. If you don’t have enough time, you might consider putting your money into one of many high-yield savings accounts. Establishing a foundation for your future is important, and it’s never too early to start.
Deciding How Much to Put Back In
There are two effective ways to determine how much profit you can reinvest. Some people calculate a percentage of the surplus, somewhere between 20% and 50%, and use those funds exclusively for business ventures. Other people will find a specific goal to fulfill (such as buying new equipment for your home office) and simply save up enough surplus until they can fully fund that goal. At the end of the day, it depends on what the goal is.
Where to Go From Where You’re At
How to best reinvest your surplus largely depends on what you intend to do. For example: freelancers who obtain most of their jobs through third party platforms might want to invest some of their surplus into having a professional portfolio website built. This gives the appearance of legitimacy and allows you to branch out, contacting high profile clients directly and eliminating recurring fees that are inevitable when a middleman is involved.
If you’ve already independently established yourself, reinvesting in your business might mean holding onto that money for yourself. You can use it as a stipend to hold you over while you’re writing eBooks or creating other for-sale content that will generate passive income streams. Perhaps, spending that money on airfare and accommodations to attend an industry networking event is exactly the kind of reinvestment you need to promote your professional growth.
Aim for Return on Investment
The wisest way to utilize a surplus is whichever method will yield the best return on investment. Buying a new desk will probably make your workspace a little more charming or increase the size of your work surface, but it won’t provide you a return on your investment. The desk isn’t going to directly lead to a profit, making it far lower on the list of wise priorities.
Instead, paying for some targeted ads that will promote your services to the people who are most likely to need them will be a better bet. You’ll see earnings back from what you’ve spent, and a successful campaign should get you back more than double the amount you put in.
Before you put money back into your business, you’ll need to answer two questions. The first is “Can I realistically afford this?” and the second is “Will this directly result in a higher earnings potential for me?” If the answer is yes on both counts, go for it. Build your empire, rule your niche, and retire young.
About the author:
Michelle Arios is an avid blogger, deeply interested in all aspects of creating and growing a successful business. Michelle might often be found online, sharing her thoughts and ideas with job-seekers, freelancers, and business owners alike. Feel free to reach out to her on @MichelleArios and say “hello”.