Definition

Keeping a separate account to save extra money for future needs. It’s a safe place to store funds for emergencies or growth opportunities.

What to consider

  • Evaluate reinvestment opportunities carefully.
  • Balance growth with retaining a cash buffer.
  • Monitor the return on reinvested funds.

Real world scenarios

  • A restaurant reinvests its profits to upgrade kitchen equipment.
  • An online seller uses extra earnings to expand product lines and marketing efforts.
  • A consulting firm channels surplus funds into staff training and technology upgrades.

Related terms

Entrepreneurial Finances