Successfully Self-Employed: Invest and Reinvest


For founders as well as for established self-employed, the topic of money is the linchpin of business. As a founder, you generally earn little at first and strive for healthy growth. Long-term self-employed are also wondering how they can consolidate their sales and maximize profits. When does it make sense to start making investments and reinvesting profits again? We pursued the topic – regardless of the respective industry.

Many founders invest time rather than money

Every beginning is difficult, and anyone who, as a founder, has not been able to attract a generous investor for his idea, has to calculate exactly what he can and cannot afford. First of all, not only does the chic company car fall flat, but also the professional web design. With relatively little knowledge, you can do a lot yourself here, as well as with marketing , branding or acquisition . Even the bookkeeping and tax, many founders start off by doing their own thing because they shy away from spending on tax advisors. That’s fine for a start, because the business must first develop and meet the requirements of the business plan. At some point, however, the time will come when you should become more professional and hand over individual areas to trained hands. 

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Concentrate on the core business 

A business that is growing requires more and more attention. If the bookkeeping for a handful of customers can be done quickly on the side, a stable customer base has completely different requirements. It is also clear that competitiveness on the Internet can only be ensured with a professional web design and SEO. When you as a founder notice that you spend more time on administration and organization than on the actual tasks, which represent the core business, it is time to gradually hand over the tasks. Especially in areas that are fundamental to the business, one should not necessarily wait for profits to reinvest, but compare cheap small loans online. In times of low interest rates, this is worthwhile and drives business forward. Those who shy away from any investment risk stagnating business. On the other hand, not every dollar of sales should flow straight back into business. How do you know how much to invest?

From what profit can and should one invest?

Before you can think about investing, you should have the financial basics. These are:

  1. the running costs (liquidity),
  2. your own salary that you have to pay off,
  3. the taxes and
  4. the reserves.

Running costs:

There is nothing to be changed about these costs, they have to be available every month. These include rent for business premises or the office, the costs for suppliers, legal advice and legal texts (especially essential online), Internet and telephone, electricity, commercial insurance, costs for employees and other individual costs.

Your own salary:

Basically, the salary is one of the fixed, running costs, but it is a little more flexible. It is also possible that a founder lives on reserves for a few months and only pays off a salary after a certain period of time.

Many self-employed people view their entire profit as a salary, which is not correct, because taxes and reserves must also be paid from profits. But what amount should your own salary be?

The amount of the salary does not only depend on what one “would like” to earn, but there are very clear constraints. The items rent, electricity, telephone, food, loan installments and, above all, health insurance cannot be shaken, they are a must. You also have to take care of your retirement yourself and shouldn’t let this topic drag on for years. Anyone who makes a budget knows the amounts and can calculate their minimum salary.

The taxes:

One of the most important issues and a pitfall for many founders. This is because in the first one or two years after a company is founded, income tax is not incurred directly. It will be charged retrospectively when the amount of the income has been determined. In this case, however, the quarterly advance payments are also due, which puts many self-employed people into trouble who have not put taxes aside.

The sales tax can be a problem for some self-employed when it is due in retrospect. It has to be paid if the annual turnover exceeds a certain amount.

The reserves

In life, good times and bad alternate, and so does business. For this reason, every entrepreneur should create a cushion that can help them through difficult times. A rule of thumb is that you should make ends meet for around six months with no income. That means saving six times the amount of running costs and your own salary. Then you can feel safe, cope with unplanned expenses and bridge bad times.

Only when these costs are secured can you seriously think about reinvesting your profits.

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How much should you invest?

The sum on the business account that exceeds the amount of the required reserves can be invested at any time. This does not apply to necessary investments such as accounting, advertising, mobility, etc., which are counted as running costs.

What should you invest in? 

On the one hand, there are commercial investments such as office furniture, IT, company cars, etc., on the other hand, investments that should make a profit, such as funds, real estate, precious metals and a few overnight money accounts, which, however, can hardly compensate for inflation with the currently low interest rates. What you invest your profit in depends on your individual needs. Perhaps you’d prefer the security of an investment in gold that brings long-term returns, rather than a better company car. Perhaps you also need the car to make an impression, to generate trust and thus to be able to further increase your own sales.

Invest and save taxes

The advantage of commercial investments is that they reduce profits and thus bring a financial advantage. The depreciation periods must be observed, but sales tax can be claimed immediately. Electronics are written off over three years, furniture has to last more than ten years. However, there are a few tricks to avoid having to adhere to the duration of the depreciation. Purchases worth 150 to 1000 dollars can also be combined and written off over five years, or special write-offs can be claimed. In addition, planned, larger inventions can be asserted proportionately tax-reducing three years in advance. The tax advisor knows more!

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