Where to put positive cash flow?

[v***@yahoo.com]

If your business is generating positive cash flow, where should you
put the money ? If your business really does not need the money is it
better to put it in the bank? Or is it always better to put the money
back into the business (i.e advertising, new gadgets ) etc even if
these things yield questionable ROI's?

[Mark T.B. Carroll]

Post by v***@yahoo.com
If your business is generating positive cash flow, where should you
put the money ? If your business really does not need the money is it
better to put it in the bank? Or is it always better to put the money
back into the business (i.e advertising, new gadgets ) etc even if
these things yield questionable ROI's?

Well, it depends how saturated your market is, and what chance you have
of using your current customer base and expertise or whatever to slip
into new markets. If you can use the money to increase your volume of
profitable activities, it's often worth doing so. Your question seems to
be raising the additional one of, how do I predict a course of action's
return on investment? The answer is usually to see how it's worked for
others in a comparable situation.

-- Mark

[Mark T.B. Carroll]

Post by v***@yahoo.com
If your business is generating positive cash flow, where should you
put the money ? If your business really does not need the money is it

Another option is, if some equity holder in the business values the
equity less than most others, there might be a price for buy-back that
leaves everyone thinking they won, and when there's spare cash in the
business it can be the business that buys back those shares.

Post by v***@yahoo.com
better to put it in the bank? Or is it always better to put the money
back into the business (i.e advertising, new gadgets ) etc even if
these things yield questionable ROI's?

It's probably also a good time to indulge in anything that has a pretty
sure ROI but is expensive/long to get going.

-- Mark

[Brian Flanagan]

Post by v***@yahoo.com
If your business is generating positive cash flow, where should you
put the money ? If your business really does not need the money is it
better to put it in the bank? Or is it always better to put the money
back into the business (i.e advertising, new gadgets ) etc even if
these things yield questionable ROI's?

Calculate your future annual return on capital within the business
with the surplus cash included and assuming that it is productively
spent. Then calculate the future annual return on capital assuming
that the surplus cash is extracted (via dividends etc.). Then
calculate what the extracted cash could earn in the future years if
invested elsewhere.

These three sets of calculations should give you a feel as to where
your cash should go.

--
Brian Flanagan Invest-Tech Limited, Ireland
<http://www.planware.org> <http://www.business-plan-guide.biz>
Extensive advice about business planning, finance, management & enterprise ...
Planning shareware, on-line financial planner, planning software store ...

[John A. Weeks III]

Post by v***@yahoo.com
If your business is generating positive cash flow, where should you
put the money ? If your business really does not need the money is it
better to put it in the bank? Or is it always better to put the money
back into the business (i.e advertising, new gadgets ) etc even if
these things yield questionable ROI's?

You didn't give any clue as to the size of the business or
how it is organized. If you are a small business, and you
retain your earnings, you run the risk of being taxed for
excess retained earnings. The IRS sees that as an attempt
to avoid income tax. So, the startegy is to invest the money
just like a person would invest it (going for best yield
for your risk tollerance) up to the IRS limit, then pay the
rest out in retirement funds (best for the owner and employees)
and dividends (taxable for the recipient).

-john-

[v***@yahoo.com]

Actually I am just a sole proprietor with no employees.

[John A. Weeks III]

Post by v***@yahoo.com
Actually I am just a sole proprietor with no employees.

Then it is a moot point. You and the business are one in the
same. There is no money "in the business", it is all your
money. If it is schedule C profit, you pay personal income
taxes on it. The best tax strategy is to look at a SEP
account (or similiar IRA qualified instrument). You can
shelter a very large amount of money in a SEP compared to a
traditional IRA. Beyond that, you invest the money where you
expect the best rate of return...wether that be in stocks and
bonds or expanding your business.

-john-