5 Things Effective Entrepreneurs Spend Their Money On

By Charlene Oldham
GOBankingRates.com.

Starting your own business allows you to be your own boss and pursue your passions in the workplace. What it probably won’t provide, at least in the beginning, is a whole lot of financial stability. It typically takes startups at least three to six months or more just to break even.

And when the business is in the black, entrepreneurs shouldn’t expect to pocket the profits. Instead, they should plan on reinvesting in the business. Here are five things effective entrepreneurs spend their money on to help catapult their companies to the next level of success.

PRODUCING QUALITY GOODS OR SERVICES
Kyle Taylor founded The Penny Hoarder in 2010. In one year’s time, the website, which offers advice and resources to help people earn and save money, brought in about $55,000. Rather than reaping the windfall, Taylor plowed half of that back into the business and redesigned the site. He’s continued the practice of reinvesting half his profits; spending on advertising, site development and design; developing a smartphone app; and expanding and improving the site’s content.

“We just acquired the company that creates all of the content for The Penny Hoarder, and now we’re focusing on building a larger in-house writing staff,” Taylor said of his recent reinvestment strategy. “This year is all about investing in our team, which has grown from one employee to 16 employees in just six months.”

MAXIMIZING INVENTORY OR SERVICE CAPABILITIES
One of Warren Buffett’s earliest investments was a pinball machine that he and a buddy bought to put in a barbershop while Buffett was still a high school student. With the money they earned, they bought more machines until they had eight in different shops.

When the friends sold the venture, the future Oracle of Omaha used the proceeds to buy stocks and to start another small business. By age 26, he’d amassed $174,000, or $1.4 million in today’s dollars.

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