What percentage of profits to re-invest in own business?

[HomesteadingSal]

I have a hobby-turned-small-business that I run out of my home. After only 2 years (not sure if that's a good time frame or not) I'm turning out a nice profit. I'd to like to remodel and expand in the near future. Business is very good and I have more of a demand than what I can supply! What percentage of a profit should be used for such things? I'm currently not making enough to live solely off of, but if all goes well with the expansion, I easily could. Any advice would be appreciated!

[Pam6]

If it were me I would do all I could to make the business profitable to the point that I could make a living with it. So if it means investing in it now to get it to pay off in the near future and I had the means to do so I would!

[PD-Riverman]

I sell items for a profit and do labor on repairs. I re-invest all profits in all sales and put the labor in my pocket. When my sales profit starts building up in my savings, If I do not need it for the business---I make a good draw for personal use. I been running this business part-time for 25 years.

[clovis]

Welcome to the forums, BTW.

I think it is a very, very difficult question to answer. There are just too many factors involved.

I believe in strong, healthy businesses that cash flow well and have no debt. That is going to be a major factor in my business.

Overall, if I were planning on making this business my sole income, and I felt strongly that I could buy stuff that would easily resell, then as much money as you can re-invest as possible is going to benefit you in the long run.

But, if you are going to delve into new areas that were unproven, and or you were considering big debt, I'd tell you something different.

Can you tell us more about what kind of business you have going, and some of the circumstances you are facing??

[HomesteadingSal]

Thank you for the input. I, too, would like to continue as I am now, debt-free. I really don't want to share my business for multiple reasons. Mainly due to privacy online that I've recently had problems with. The other is that it's actually such a simple business concept that many do do it, but not in the same way I am. I don't want to give away secrets, otherwise I'd have much serious competition. I don't mind competition, but I don't want others literally copying my business operation. And no, it's nothing illegal!

I don't really have any circumstances right now, other than out-growing my "facility".

[equinecpa]

And don't forget to set aside part of your profits for income taxes. I have seen too many small business struggle to pay their tax liabilities because they've reinvested all of their profits.

I would do a realistic financial projection. Be conservative with your sales estimates. If your projection shows that you can realistically carry the extra costs of the expansion than it might be time. What kind of expansion are you considering? Building a shop or something? If it's hard construction costs like this you might see what leasing space would cost you -with leased premises you could test the waters before committing to the cost of construction. You could also undertake your expansion plans more quickly. Another item to consider is would the expansion (again assuming this is construction) increase your home's fmv? Or is it going to be a sunk cost.