Not Reinvesting? You’re Killing Your Income Potential
With my January income report coming up later this week, I thought it would be appropriate to talk about something I don’t think I’ve ever explicitly discussed here before: reinvesting. You often hear about “reinvesting” as it applies to large corporations. For example, XYZ Manufacturing Inc. had a profit of $4 million in 2010 – instead of paying it out to its owners, the company reinvested the money by putting it toward additional research and development, to hopefully bring greater earnings in the future.
The same concept applies to us too – we can take our earnings, however large or small, and put it toward things that can help us expand our income potential.
What Are Some Ways to Reinvest?
There are a couple key ways to reinvest the money you make online, and they don’t have to be “big ticket” purchases by any means.
This shouldn’t come as a surprise to you. Outsourcing is one of the best ways to leverage your current earnings into greater future earnings. As I wrote about in this article, there are a number of ways to outsource, so I’m not going to go into detail on how to do it.
I will, however, give a good example about how a little bit of earnings today can translate into huge earnings down the road. Let’s take a look at two hypothetical scenarios (emphasis on hypothetical). In both cases, the person begins with one niche site that earns $50 in month #1.
Scenario A – The Saver
The saver is conservative. He believes he’s doing what’s best for his business by saving the money he makes. It’s possible that he’s waiting to buy something significant – maybe a new computer for the business, or perhaps he’s saving it for something personal. At an extreme, the saver might be trying to save for what he considers to be sufficient to leave his day job and become a full-time entrepreneur.
After the first month, the saver obviously hangs onto the $50 his site earned. He continues working hard, adding backlinks, adding content, and getting his site into a position to earn more money.
Assume that his additional work allows the site’s earnings to increase 20% each month, until its earning potential reaches a maximum point at $100/month.
- Month #1: $50
- Month #2: $60
- Month #3: $72
- Month #4: $86
- Month #5: $100
- Month #6: $100
- Month #7: $100
- Month #8: $100
- Month #9: $100
- Month #10: $100
- Month #11: $100
- Month #12: $100
Total 1st year earnings = $1,068
This doesn’t seem so bad, and it doesn’t take into account the possibility that the saver might start a new site or two, and work on those as well. He’s writing all the content and building all the backlinks himself, however, so he doesn’t exactly have enough time to manage more than a few sites in this way.
Scenario B – The Reinvestor
The reinvestor understands the power of money and leverage. The reinvestor understands that $1 put back into the business today might turn into $10 a year from now (that’s a whopping 1000% return on investment, if it’s achievable).
The reinvestor doesn’t think about taking from his business – he thinks about the power of giving, and the growth potential it offers the business.
The reinvestor begins the same as the saver. After month #1, he earns $50. The difference is, he spends that money immediately. Instead of spending the next month writing articles to publish additional content to the site, he pays a freelancer $40 to write 10 articles for the site. Meanwhile, he buys a new domain with the other $10 and begins building site #2, which also earns $50 after its first month.
After month #2, the reinvestor earns $110 ($60 from site #1 and $50 from site #2). Once again, he takes $40 out to add more content to site #2, and buys a new domain for site #3 for $10. With the remaining $60 in earnings, he hires a new freelancer to build backlinks for sites #1 and #2.
Assume that each site’s earnings follow the same trend: 20% earnings growth each month, with a cap of $100/month.
After 12 months, the reinvestor has 12 niche sites established and enough earnings to have all content and backlinks created by freelancers. To calculate the year 1 earnings, I needed a little help from Excel…
In this scenario, the reinvestor earns a whopping $6,354 in year one. The key difference between the saver and the reinvestor, of course, is that the reinvestor was willing to put his earnings back into the business.
[Note: I’m well aware that these assumptions are not 100% accurate. It’s possible that some sites won’t earn anything until month #4, and other sites will earn far more than $100/month after a year. The purpose of these scenarios was to illustrate a simple point.]
Online Tools & Software
These are the tools I use on a daily basis when I’m not altogether neglecting my niche sites. To make my point clear, I’ve also listed the cost of each product. (Yes, these are all affiliate links.) It should come as no surprise that I use all of these in conjunction with the Ultimate Backlink Tracker.
- Market Samurai ($97 if purchased during free trial period)
- The Best Spinner ($77/year)
- BlogBlueprint ($57/month)
- Unique Article Wizard ($67/month)
- Bookmarking Demon ($147)
Over the course of an entire year (assuming it’s the year I purchased Market Samurai and Bookmarking Demon) I spend a total of $1809. I know, that’s a lot of money. I have no problem doing it though, because I know the software will help me earn far more than what I spent on it.
It bothers me when people aren’t willing to invest $97 in a remarkable piece of software like Market Samurai. If you aren’t willing to spend the money on software that gives you a serious advantage when it comes to building profitable niche sites, I don’t believe you’re serious about making money online.
The good thing is, that’s okay. Making money online isn’t for everyone. It takes a lot of hard work, even though some people make it look easy (I certainly I am not one of them).
The Bottom Line
Overall, this is the point I’m trying to get across: You don’t need to spend money to make money, but once you’re making money, you need to be willing to reinvest it into your business if you are serious about growing and reaching your earning potential.
It’s tempting to have an awesome month, and spend the money on something fun, like a new plasma TV or a trip to Las Vegas. Don’t get me wrong – it’s okay to have fun spend some money on yourself from time to time. Just make sure you don’t lose sight of your goals, and the fact that putting your success back into your business will accelerate your growth far beyond what you’ve ever imagined.
What do you think? Are you a saver or a reinvestor? Can you think of any other benefits or drawbacks to either approach?