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  1. #1
    Join Date
    Sep 2003
    New York

    Profit & Investing


    For a while now I've been wondering, how much of the profit that a business makes should go back into perfecting it and advertising?

    On one hand, we are able to make X amount of money and spend Y each month, which leaves us with a nice sum in pure profit. However, the growth rate will be rather slow.

    On the other hand, we can make X amount, invest Z back into marketing and improvements, still have a bit of profit (but smaller portion), and grow at an accelerated rate.

    In other words, you can slowly grow and be pretty "safe" or instead you can accellarate your growth during the first year and hopefully you'll wind up with a much bigger return down the line.

    Just curious to hear experiences, suggestions, and opinions on how to deal with the company's profit.


  2. #2
    Join Date
    Aug 2003
    Chesapeake, VA
    My personal rule of thumb would be this... spend conservatively at first to test out various methods of advertising & marketing, and until you are comfortable with your support infrastructure.

    When you find one that works, stick with it and roll with it. Advertising opportunities don't last forever, nor does their effectiveness, so if you find a winning opportunity - run with it as long as you can or until the effectiveness starts to wane.

    The nice thing about any recurring/residual-oriented business is that a client sold today creates a residual profit stream for tomorrow. So it's not a "one up" sale but rather an ongoing relationship that you can continue to reap the benefits of on a long term basis.

    The key thing that you need to keep in mind is to make sure that you allocate not only the funds for ongoing marketing - but also the ongoing support needed to keep those existing and new clients very happy. The amount of support required will also increase along with your sales volume and this is an important point to keep in mind.

    For instance, there are some companies in the bankcard industry that sign a lot of new merchants each month - but then lose a ton of accounts as well. I'm sure there are also similar examples of this with Web hosts and other companies in the Internet industry.

    Kinda like taking two steps forward, one step back. The reason is simple: they don't staff up or invest the necessary funds to ensure that sufficient support is in place to handle the volume.

    So - my suggestion is to keep both aspects - marketing costs & support costs - in mind... find what works, and then dive into it while it lasts and then start looking for the next marketing course to chart. - Trusted Merchant Account Solutions since 1998
    Many thousands of successful, growing businesses benefit from our expertise every day. You can, too!
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    Learn more today at - we look forward to helping your business grow!

  3. #3
    Join Date
    Feb 2001
    West Michigan, USA
    It depends on your business plan and goal.

    I invested quite a bit back into my business, simply because I had (and still have) "big" dreams of where I want my business to end up. I could have remained a reseller or have kept my servers colo'd at someone else's facility (both excellent choices for many, many hosts) and pocketed more of the profit over the years. However, I'm holding out for bigger profits later...which are *finally* starting to pay out to me.

    ||| 99.999% Uptime SLA!!!
    Plenty of space and bandwidth to fit your needs! - - (WP Friendly - Premium Reseller Hosting and Cheap Dedicated Servers)

  4. #4
    Join Date
    Apr 2003
    Ottawa, Ontario
    You have to decide how much you want to grow. On one hand, if you grow too slowly, you'll be unable to keep up with the industy, on the other hand, if you grow too quickly, you can risk crashing & burning, not to mention getting the attention of the big web hosts (not neccesarily bad, but all it takes is one of them not to like you enough and you can say bye-bye).
    Peter M Dodge,
    President, Viridian Tower Electronics

    (Formerly Creative Director of LiquidFire Network Solutions 2003-2007)

  5. #5
    Join Date
    Feb 2004
    Southern California

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