Many people keep asking questions “What is the best way to deal with their earn from their business?”. Some people might pocketing it or reinvest into another business; but, Kyle Taylor, the founder of the Penny Hoarder, suggested that we should reinvest half of the earning back into our company. In just several years, his website bring him millions of dollars as returning from reinvestment while the website was originally initiated as a hobby blog. He has shared three main points to the public via the Entrepreneur as below:
It’s the best way to foster fast growth
Many of the business owners treat profits from the company as their salary. However, in opposite to the general behavior, Kyle claims that if we don’t put some of the earning back into the business, we are starving growth. Yet, he also mentions that it’s depended on the owner if s/he wants to earn the same amount year after year, small incremental increases, or a lot more.
These last few years, following the reinvest half of what I earn strategy, his business has grown exponentially which is far faster than when he pocketed all the profits every year.
- 2011: A year after he launched the Penny Hoarder, the business brought in approximately $55,000 through affiliate ads, Adsense, and sponsored posts and links. He recognized that traffic to the website would be crucial for making money. Then, he made his first big reinvestment with the amount of $20,000 to redesign the business.
- 2012: The business earned $111,000. He then reinvested half of it again on traffic-generating tactics like Facebook, sponsoring contests for readers, and another redesign.
- 2013: The returns increased up to $216,000. Never stop reinvesting, he put half of the return to invest on freelance writers and developers to leverage the site content, and website design and infrastructure. What’s more, he also purchase ads to drive traffic in.
- 2014: The company brought $3.2 million as profit. About 75 percent of the revenue came from affiliate advertising, so he continued to invest in driving readers to the website with the amount of $1.8 million on ads. The majority of that spend was on recommendation engines: Taboola, Outbrain and Facebook ads.
- 2015: This year, the company is projected to bring in about $10 millions. He will reinvesting half of the return on development, design, Facebook ads, new mobile app, editors and writers.
It’s an opportunity to learn
“All those investments I made in the business, not all of them were successful”, he said. He lost money on advertising before he figured out how to run effective ads. He hired wrong people including writers. But each of those experience helped him figure out how to run a successful website that grow continuously today. He learned how to better target audiences through Facebook advertising, write more effective articles, and how to hire right people to improve the business. Without those mistakes, he wouldn’t be so successful today.
When you invest in your business, be prepared to make mistakes.
You cannot do everything yourself
As a sole business owner, you will be maxed out in terms of time or skill or even both. You cannot accomplish everything alone. You will need to hire freelancers, contractors, or maybe full-time employee(s) to lift your business to the next level. If you do it in a smart way fitting to your company’s capacity, it will be one of the best moves in your business journey.
Mr Taylor just hired his first employee this year, he has long invested in contractors and freelancers including developers, designers, and writers. The key is to identify what you are good at and outsource the rest.