If you are profitable, do you plan to reinvest profits or withdraw some or all of them?

<p id="isPasted">As searching for answers, you’ll find all those recommendations for exactly how to do it. Such as,</p><ul><li>Invest 30% of your profits back into your business.</li><li>Invest 50% of your profits back into your business.</li><li>Invest all your profits in the first two years.</li><li>Take your profits first, so you don’t end up investing everything back into your business.</li></ul><p><br></p><p>Let’s talk about that last one - the Profit First model. I’m picking that one out because it’s popular right now, and some of my clients follow it.</p><p>The profit first model, that was created by Mike Michalowicz, is a relatively simple concept — a budget for businesses. Michalowicz flips the traditional idea of paying expenses first and taking profits second. Instead, he encourages business owners to allocate a percentage of every dollar that comes into their business to profit. Similarly, a percentage goes to taxes, to expenses, etc.</p><p>By following this method, Michalowicz says companies will be more profitable. They’ll think more carefully about each expenditure they make. Their profits will be more than what's left over at the end of the year.</p><p>I see the benefits of Michalowicz’s model for creating discipline, especially for people who’ve never run a business before. It could be helpful if you’re worried about your emotions getting in the way of your financial decisions.</p><p>My problem is that it takes away an entrepreneur's agility and creativity. Sometimes huge growth leaps come from taking financial risks that lead to a year with very little — or no — profits. Hopefully, they turn into huge profits in the future. Tying yourself to a predetermined budget that focuses on profits (rather than growth) first may come at the expense of...well, growth.</p><p>You could coast along, doing what you’re doing. Maybe you pull a million dollars out each year as your salary. You roll like that until you run the business into the ground. Maybe it goes seven years, and you walk away with $7 million.</p>