Running a business comes with tough financial decisions, and one of the most pressing dilemmas you’ll face as an entrepreneur is whether to reinvest profits or pay yourself first. On one hand, reinvesting can fuel business expansion. It helps you scale operations, improve products, or reach more customers. On the other hand, compensating yourself keeps you financially stable and empowers you to sustain your personal life without constantly relying on external funding. It’s not always straightforward to strike this balance, and missteps in either direction can create challenges down the road.
The key to making the right choice isn’t about following a one-size-fits-all approach—it’s about knowing when to reinvest and when to take a salary. Every business has different financial needs, and what works for one entrepreneur may not be the best strategy for another. At Maya Business, we can provide you with financial tools that can make these decisions clearer and easier to execute. We’re deeply committed to empowering startups and SMEs across the Philippines with expert advice and enterprise-grade finance solutions that help business owners manage their money wisely.
Let’s explore the key factors that can help you pay yourself and reinvest at just the right times.
Optimize Your Financial Management System
The way you handle your business’s finances can make or break your ability to balance reinvestment and personal compensation. Without a structured system in place, you risk misallocating funds, making impulsive financial decisions, or overlooking critical opportunities for growth. An effective financial system allows you to manage expenses more efficiently and ensure that you’re maximizing your earnings, both for the business and for yourself.
A strong financial foundation starts with having the right small business banking tools. Maya Business Deposit provides you with a streamlined way to do your small business banking online. This solution gives you access to high interest rates, free transfers via PESONet and InstaPay, and bulk payment capabilities to handle supplier and payroll transactions seamlessly. With no minimum balance requirement and built-in security features, it’s an SME business banking solution designed to keep your money working for you.
Assess Your Business’s Financial Health First
The question of whether to reinvest or take a salary is ultimately about what your business can realistically sustain. If your cash flow is unpredictable or your operating expenses are high, prioritizing reinvestment until things stabilize might be the smarter move. Expanding marketing efforts, upgrading infrastructure, or building a financial cushion can position your business for long-term stability and pave the way for more sustainable future profits.
On the other hand, if your business has a steady cash flow and is generating reliable profits after covering operational costs, it may be time to start paying yourself. After all, financial health means you shouldn’t put yourself in a precarious financial position either. In the event that you find yourself constantly dipping into personal savings or taking on debt to cover personal expenses, it might be wise to allocate a portion of your profits for personal income. Doing so can help you maintain both business and personal stability.
Set a Clear Strategy
Ad-hoc financial decisions can destabilize both your business and your personal circumstances. It generally helps more to have a structured approach to allocating profits instead of deciding on a case-by-case basis. A well-defined strategy removes guesswork and ensures that both reinvestment and personal income stay sustainable over time.
One common method is the 50/30/20 rule, where you reinvest 50% of profits into the business, set aside 30% for personal income, and funnel 20% toward savings or debt repayment. You get the funds you need for continued growth while also compensating yourself fairly and maintaining. Of course, every business is different, so base your ideal allocation on your unique financial situation, industry demands, and long-term business goals.
Consider Tax Implications
The way you handle profits has a direct impact on your tax obligations. Reinvesting earnings into your business—through moves like equipment purchases, hiring, or marketing—can reduce taxable income by classifying these expenses as deductions. This can be a major advantage, particularly for growing businesses that need to minimize costs while expanding.
On the flipside, paying yourself as a business owner may increase your taxable income, depending on how you classify your earnings. Taking a salary versus dividends or owner’s draws can have different tax implications, and the best approach varies based on your business structure and revenue model. A tax professional can determine the most cost-effective way for you to balance reinvestment and personal income. Don’t hesitate to consult one whenever you need it.
Reevaluate Your Needs Regularly
What works for your business today may not be the best strategy six months or a year from now. As your company grows, your expenses will fluctuate and market conditions will also shift. These developments, in turn, might make it necessary to adjust your financial priorities. Regularly review your business’s financial health so that you can make decisions based on up-to-date information. Schedule periodic financial check-ins—whether monthly, quarterly, or annually—to assess whether your current profit allocation strategy is still serving both your business and personal needs.
Master the Art of Business Administration with the Help of Maya Business Solutions
It can be tricky to figure out what to do with your business’s resources, particularly in the startup stage, but there’s no need for you to face these challenges alone. Sign up for Maya Business to gain access to a comprehensive suite of tools for payment, disbursement, and business banking that can make financial management a walk in the park for your new company.
A Maya Business account allows you to open a Maya Business Deposit account and use it as your settlement account. With an industry-leading 2.5% per annum interest rate, you’ll earn PHP 25,000 in interest per year on a PHP 1 million deposit. You also get to send money to your partners and suppliers for free via InstaPay and PESONet, which means more savings and fewer fees to worry about.
Signing up also qualifies you for a no-collateral Maya Flexi Loan offer of up to PHP 2 million in just 3 months, which opens up another funding source you can use to chase promising growth opportunities. Just use Maya as your primary processor for all wallet and card payments. The more you use our solutions, the better the loan offer will be.
Sign up for Maya Business today and the many benefits of our top-tier solutions can be yours instantly.
