Should You Take Profits Or Reinvest Back Into the Business? 🤑 #shorts

5 Oct 2022 · 1 min

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This content was created by Eric Siu. This content was uploaded by Eric Siu. This is a YouTube short titled "Should You Take Profits Or Reinvest Back Into the Business? 🤑 #shorts" (created 2022-10-05). The excerpt is a brief dialogue between two unnamed speakers about entrepreneurship and financial strategy. Speaker B advises business owners to take distributions early to enforce financial discipline (set a target cash balance and withdraw to it repeatedly) and only truly reinvest once they have sufficient personal wealth and proven capital allocation skills.

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Taking distributions versus reinvesting back into the business. What's your philosophy on that?
I think it's like entrepreneurial phase and risk tolerance. I advise most business owners, entrepreneurs to take as much money outta the company as they can. Teaches good financial hygiene. 'Cause a lot of people are like, oh, I'm reinvesting in the business right now. I'm like, are you reinvesting or do you just make no profit? Big difference, right? And a lot of times they're not actually reinvesting in the business. They just don't make any money and it just sounds more socially acceptable to say you're reinvesting. I'm a big believer in like set the number that needs to be in the bank account every month, drain it to that, and then do that as many times as you can. But for me, once I had a certain amount of material wealth that I didn't have to worry about any personal needs for good, at that point, I think it makes more sense to then truly reinvest because now you've learned all the habits that actually make money and take that capital because now you've gotten better at allocating capital because you actually had some. And then you can think in terms of return on that allocation.