How Much to Invest in Your Business

Reaching profitability is a major milestone for any small business owner. Once your business generates enough revenue to cover expenses and your salary, the next step is determining how much to invest in your business to support long-term growth while still maintaining healthy profits. From hiring and equipment upgrades to marketing and expansion, understanding your investment priorities—along with available business loan options—can help position your business for continued success.

Striking the balance depends on such factors as the everyday costs of running your business, your goals for expansion and your personal financial needs. With the right business financial planning, you can ensure that the money you pour back into your business pays off in exponential ways.

Key takeaways:

• Small business owners must balance the need for taking money out of their business with the value of reinvesting profits back into the company.
• Factors that determine how much you should reinvest include your company’s goals, your business growth strategy and your personal financial needs.
• Fifth Third Bank offers resources that can help you set reinvestment goals such as cash-flow tools, treasury management solutions and loans for capital improvements.

Why reinvestment matters for your business growth strategy

Reaching profitability isn’t a given. In fact, only 46% of small businesses reported operating at a profit in 2024, according to the Federal Reserve.

Even if a business is profitable, there are often competing demands for those profits ranging from hiring employees to buying new equipment. While it can be tempting to keep some of the profits for yourself, redirecting earnings back into the business can help the company grow bigger and faster.

Deciding how much to reinvest in your business

While many experts suggest reinvesting 20% to 30% of profits back into the business, your needs may vary based on your immediate business goals and your personal financial situation. Some business goals are more time sensitive than others. For instance, investing in software that automates some of your back-office functions could give your staff more time to focus on finding new customers. By reinvesting your profits in new technology solutions, you might see an increase in profits sooner.

You also must consider how much more you may need to live on while you’re running your business. For example, you might have a child to put through college or medical bills to pay. Keep in mind: The amount you reinvest may change year to year depending on your business aims and immediate needs.

How to determine the right business reinvestment amount

Every business will have unique needs to consider before reinvesting profits into the company. Before exploring small business financing options here’s how to come up with the right amount for your needs:

Start with clear short- and long-term goals

Determine what steps your business can take to grow, and whether an influx of cash will help you meet your objectives sooner. Fifth Third Bank business savings accounts can help you set money aside for those goals.

Estimate the costs needed to reach those goals

Figure out how much you would need to reinvest in your business to achieve your desired results. By using Fifth Third Bank’s cash management solutions, you may find that you have more money to set aside than you thought.

Prioritize investments that diectly drive revenue

You might not be able to finance every idea you have for your business immediately. Focus on the goals that will bring in the most money the fastest. Once your profits increase, you’ll be able to reinvest even more. A Fifth Third Bank business checking accounts and cash-flow tools to help you balance what’s coming in with what’s going out. You can also explore expansion through lines of creditand loans for capital improvements. Fifth Third Bank’s treasury management solutions leverage technology to streamline your payment process, which can save money that can go toward further expansion. And when you’re ready to reinvest, you can use digital tools to help forecast reinvestment capacity.

Reaching profitability is an exciting milestone and one that opens the opportunity to do even more with your business. Here’s what you can do to take next steps:

• Learn how SBA loans can help you expand.
• Speak with a relationship manager about your plans for growth.
• Explore the benefits of business transformation.