Reinvesting revenue

I’ve seen many founders reinvest part or whole of their revenue back to the product or company, especially in the early days. Many even don’t draw any salary or keep profits at all till revenue gets big enough. They use the money in a few ways:

• @philostar buys writing services to write SEO articles for his 4dayweek.io job board
• @tibo_maker acquires small projects from other makers as lead gens for their own project Tweethunter
• Others hire freelancers or VAs to offset the work they hate so that they can focus on the work that moves the needle
• Recently I’ve been buying relevant domains for Plugins For Carrd as lead gens (e.g. plugisnforcarrd.com, plugemoji.com)

Watching them, I’ve always felt a tinge of guilt not reinvesting. Even if my product earns just $10 or $100, I keep it. Part out of laziness, part out of not knowing what I can do with such a small amount of money.

But taking a step back and looking objectively, that amount of money isn’t significant to my lifestyle anyway. My main income stream is from Outsprint. Lifelog brings in around $100 per month. Plugins For Carrd a few hundred. I don’t need NEED that money. If that money were to disappear tomorrow, it wouldn’t hurt my lifestyle. So why hold on to it? That’s a question I’ve never asked myself.

The other point in favour of reinvesting is the popular saying, “You have to spend money to make money”. It’s a the ultimate growth hack, isn’t it? A very foundational one at that. With money you can grow the product or team to make more money. * Why not use it to multiply itself?* is another question I should have asked more often.

How should I reinvest should I choose to? Seems like there’s a few ways to do reinvesting:

• Put 100% of every dollar earned back into the product until it hits a revenue target, e.g. $10k.
• Put X% of revenue back every month in perpetuity, and adjust up or down as it grows. There’s a common 50-30-20 model in business where you allocate 50% to paying themselves, 30% to taxes, and 20% to reinvesting.
• Or a combination of both. 100% reinvesting in the early days, then switch over to X% later.

With a new year approaching, I’m leaning towards setting a new rule in the new year that I don’t keep anything for any product till it hits a revenue target, say $1k. Spending up to $1k per month on growing the product sounds pretty significant. I can regroup and adjust again when I do hit that milestone (if ever!).

New product practice in 2023: Reinvest every dollar into the product until it hits $1k.

What do you think of reinvesting?