For many people, tax return season is seen as a time to splurge on a new TV or furniture.
But smart business owners know that it’s much wiser to reinvest your tax return into your business each year—a choice that will yield financial dividends for much longer than a splurge purchase.
If you wouldn’t have splurged on something before getting your return, consider if you really need it. Instead, think of your tax return as profit in your business—profit you can reinvest to grow your business this year.
Today, we’ll unpack a few simple but powerful ways you can reinvest your tax return into your business for continued growth.
1. Pay Off High-Interest Debt
Studies show over 70% of small businesses have outstanding debt. Of course, debt can be a helpful tool in growing your business. But if that debt has a high-interest rate, it can be crippling.
To reduce or remove your monthly credit payments, consider using your tax return to pay off any high-interest debts you have in your business.
Then, continue to make those minimum payments, but instead of paying a credit card company or a bank, pay yourself. Deposit monthly funds in a small business bank account every month for a year, and you’ll be amazed just how much you were paying in interest. With the cash flow you free up each month, you can invest in growth on a regular basis. Getting out of debt is an investment that keeps giving back.
2. Upgrade Equipment (If It Adds Revenue)
Another way to reinvest your tax return is to upgrade your company equipment.
While it can be tempting to upgrade just for the fun of it, the key to responsible investing here is to focus on equipment that, if upgraded, will grow your company revenue.
For example, you might like a new television for the conference room, but the current one gets the job done just fine. Alternatively, your computer might be slowing you down, causing you to accomplish tasks in twice the time you expect.
Here are a few examples of revenue-generating equipment:
- Photography equipment for an e-commerce store.
- Lawnmowers for a landscape maintenance company.
- Display cases for a bakery.
- Laptops for a remote media company.
3. Hire Talented People
There’s no better investment you can make in your small business than hiring the right people.
Whether you are hiring full-time employees or building a team of freelancers, using your tax return to pay for talent is a smart idea.
With the Ndiwano marketplace, you can find talented people in just about any industry and specialization for an affordable price.
Here are a few people you might consider hiring to generate more revenue:
- A salesperson to increase the number of pitches your company makes each week.
- A marketing & advertising expert to test multiple marketing channels, including Facebook, email marketing, print ads, etc.
- A business coach to help you set appropriate goals and move your business in the right direction.
4. Invest in Training or Education
As many small business owners get busy in growing their companies, they can forget how important it is to continue learning.
If there’s a revenue-generating skill you’d like to learn but have never been able to justify the cost of a course, book, or training, consider reinvesting your tax return into your education.
Additionally, you could invest in training and education for your team—helping them grow into more productive employees and thus growing the business as a whole.
Here are a couple of ideas to get you started:
- Invest in a monthly learning platform like Masterclass or Udemy to start learning a new skill to improve your business.
- Purchase impactful business books to read and review together as a team.
5. Share Perks with Your Team
When reinvesting your tax return into your business, you might consider the impact of spending that money on your team.
One great way to do that is to share some perks with your team members. You’ll be amazed how far perks will go in boosting morale and productivity on your team.
Perks don’t have to be expensive (like all-expense-paid cruises). Instead, consider smaller investments that show your team you really care.
You might use your tax return to:
- Purchase a membership to Audible, Scribd, or some other service where your team members can learn, relax and enjoy their time off work.
- Create monetary incentives for team members or teams who achieve certain goals in your business.
- Offer company-paid spa days, amusement park days, or movie nights. NO work allowed.
6. Leverage Software to Boost Productivity
Another way to successfully reinvest your tax return into your business is to invest in software that can help you make more progress in your business.
Software, when used correctly, can have a way of increasing our output, boosting profits, and automating time-consuming processes or tasks.
If leveraging software to help you get more done and boost profits in your business sounds compelling, we recommend you try Ndiwano Workspace. Ndiwano Workspace is a business management software designed to help freelancers, solopreneurs, entrepreneurs, and SMBs get organized, get business, and get paid.
With its full suite of business management tools, Ndiwano Workspace is your one-stop app for time tracking, invoicing, payments, proposals, contracts, task management, and income & expense tracking.
7. Build Your Network
Another way to reinvest your tax return into your business is to spend money on building your network.
As a small business owner, networking can be a great way to build up your client or customer base.
You can do that by paying to attend conferences, join paid mastermind groups, or participate in your local Chamber of Commerce or chapter of Business Networking International. When investing in building your own network, here are a few people you want to keep a special eye out for:
- Referral partners: Like-minded business owners who don’t compete with you directly, but serve the same audience. Often, you can collaborate with these kinds of businesses to send referrals to one another.
- Potential clients: Attending events where your clients will be spending their time is a great way to get your brand in front of a lot of qualified people. You can either attend the event or even consider sponsoring or getting a booth.
- Employees & team members: Sometimes, meeting a person live and in the flesh can tell you a lot more about them than a Zoom call or chat interview can. Consider meeting with talented potential team members in-person to improve your hiring.
8. Just Save It (For Now)
Maybe you don’t have a really great idea for reinvesting your tax return into your business right now. That’s okay! Something will come eventually.
If you want to be ready when that opportunity does come, then consider just putting your tax return in the bank for now.
Sure, you’re not making an immediate investment in your business, but you’re leaving the door wide open for when you need to hire that next great freelancer, sign up for that next great software, or attend that perfect event.
What NOT to do with your tax return
Finally, let’s consider a few things you shouldn’t do with your tax return. Some of these might be tempting, but they’ll offer little-to-no return on your investment.
You’ll find it’s wasted in a fleeting moment, and soon you’ll have nothing to show for the extra cash you got in your tax return.
- Don’t just pocket the money personally. While it may be a good idea to put the money in the bank for a later investment, avoid the temptation to just pocket the money yourself and pad your personal checking account.
- Don’t put it in a locked investment. You might wonder if putting your tax return in a “high interest” CD or similar account is a smart move. But these kinds of accounts rarely give you more than 1 or 2 percent back on your investment—and that’s often over the course of a year or more. You can make way more back with your money by investing in your own company.
Next Steps After Reinvesting Your Tax Return
Now that we’ve explored a few ways to reinvest your tax return into your business, consider speaking with your team, your partner, your spouse, or another trusted person to make a final decision on where to best invest your funds.
Often, when we’re not quite so close to the question, the answer is much more clear.
If you’re worried you don’t know which direction to take, consider hiring a business consultant who can walk you through a few quality scenarios.
Above all, choose to be grateful you received a refund to invest back into your business. It’s a luxury not all small business owners have. And deciding what to do with it can be fun and exciting.