It's late December, and your accountant just sent over the preliminary numbers. You had a good year. After expenses, salaries, and overhead, there's a healthy profit sitting in the business account.

Now comes the question that will determine your trajectory for the next five years: What are you going to do with it?

This isn't just a financial decision. It's a declaration of what you actually want from your business and whether your actions match your ambitions.

The Two Paths (And You Need to Pick One)

There are two fundamentally different types of businesses, and neither is wrong. But you need to know which one you're running.

The Lifestyle Business exists to fund your desired lifestyle. You built it for freedom, flexibility, and income. You take most of the profits out at year-end. You're not building an empire  but rather you're building a life. Nothing wrong with that, as long as you're honest about it.

The Growth Business exists to scale and build enterprise value. You reinvest most profits back in. You sacrifice short-term income for long-term value. You want to go from $2M to $20M, from 15 employees to 150.

Here's the problem: business owners who want growth results while making lifestyle decisions.

The Disconnect That's Killing Your Growth

You say you want to grow. You're frustrated your competitors are expanding faster. You wonder why you can't break through to the next level.

Then December comes, and you pull 80% of the profits out.

You want 30% revenue growth next year but won't hire the salespeople, invest in marketing, or build the infrastructure that growth requires. You want the results of reinvestment without the actual reinvestment.

I'm not judging. I’m simply calling it out. Growth requires fuel. If you're draining the tank every December, you're guaranteed to stall.

The Math That Should Wake You Up

Two businesses, both doing $3M in revenue with $300K in year-end profit.

Business A: Takes $250K out, reinvests $50K. Hires one junior person, maintains status quo. Grows 8% annually. Five years later: $4.2M in revenue, same business value.

Business B: Takes $100K out, reinvests $200K strategically. Hires senior talent, invests in systems and marketing. Grows 25% year one, maintains aggressive reinvestment. Five years later: $11M in revenue, business worth 3-4x more.

Over five years, Owner A took home $1.5M total. Owner B took home $800K BUT owns a business worth $4-5M more in enterprise value.

That's the trade-off. Cash today versus wealth tomorrow.

Get Honest About What You Want

Before you decide what to do with this year's profits, answer these questions honestly:

Do you want to build significant enterprise value or maximize current income?

Are you willing to live on less now for much more later, or do you need the cash flow today?

Can you stomach the risk of reinvestment? Sometimes investments don't pan out.

What's your timeline? If you're 60 and exiting soon, aggressive reinvestment might not make sense. If you're 40 with 15+ years ahead, the math changes completely.

Do you actually want to manage a bigger business? Running $15M is fundamentally different than running $3M. More complexity, more people problems, more pressure. Some people don't want that, and that's legitimate.

There are no wrong answers. But dishonest answers create the frustration and stagnation I see everywhere.

If You're Committed to Growth

Most experts recommend reinvesting 50-75% of annual profits during expansion periods. The rest goes to owner compensation, cash reserves, and debt reduction.

But here's the key: reinvestment without strategy is just burning money.

You need to target high-impact areas that deliver measurable returns. That means investing in your team (better wages, training, strategic hiring), upgrading technology and systems, expanding your marketing engine, or launching new products and services.

You also need balance. Keep 3-6 months of operating expenses in reserves. Pay down debt to reduce risk. Pay yourself fairly. You need to live. Just don't fool yourself that you're committed to growth while taking 80% of profits.

And track everything. Every investment should have clear ROI expectations. Monitor your KPIs. Align spending with your written business plan. Reassess quarterly. Work with advisors who understand your industry.

If You Choose the Lifestyle Path

If you've realized you're building a lifestyle business, that's completely valid. Stop apologizing.

Optimize for cash flow. Minimize complexity. Take the profits and enjoy them. Create the freedom you started the business for.

But stop comparing yourself to growth companies. Stop feeling guilty. Stop complaining you're not growing faster when you're choosing current income over future scale.

Own your decision. There's honor in building a profitable business that funds the life you want without the stress of aggressive growth.

The Bottom Line

You can't sit in the middle, taking lifestyle distributions while expecting growth results. That's wishful thinking.

This December, when those profit numbers come in, ask yourself: What am I really building? Do my decisions match my ambitions? Am I being honest with myself?

Then make your decision and commit to it fully.

Your business five years from now will be a direct reflection of how you answer these questions today.

In my next post, we'll dive deep into the specific ways you can reinvest your annual profits and the levers to pull that will accelerate next year's growth and give you the highest return on every dollar you put back into your business.

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