What to do with excess cash?

[kandykane]

Hi, I run an equipment sales firm. We have cash just sitting around and need to do something with it.

Right now we have excess cash in a money market account, earning a whopping 1%

We have thought about purchasing a small office building, instead of leasing, as an investment.
The other big item we are going to do is expand our sales force... so we are allocating some cash to their salary(ies).
We are going to put a few thousand dollars towards marketing materials, website, etc.

But other than that, there's nothing we need like equipment, tools, etc. So what do we do with the extra cash to help grow the business?

Thanks

[huggytree]

why not take it as profit and enjoy it?

if your advertising budget is working for you and your not ready to expand id cash it in and take it

at the end of every year i take everything out of the company except for $10k for operating expenses.....i empty out the company....why keep money sitting around for no reason?....that extra $ you have is called 'profit'...take it

[ReganP]

Until a need or new idea arises, just keep saving it! You never know when business might get slow or competition increases, so save it as an emergency fund for when you really need to amp up the marketing or make it through the lean months!

[Evan]

As a growing company, distributing it will not be a good idea as if things go sour you're going to want to have some savings. You could invest it in securities, such as mutual funds and such. Then you'll have more opportunity to grow these assets.

[MyITGuy]

If you have enough set aside to cover any slow periods, then I'd say look at buying a building to operate out of rather than leasing.

[alphadore]

I would put some aside as retained earnings and take out the rest. Get yourself a vacation perhaps to reward yourself for your hard work?

[multiplexed]

And don't forget your retirement account.

Spend an hour with your accountant, investor, and computer guy.

[kandykane]

Thank you for the replies. I like the idea of a vacation but want to reinvest money into the business so I can take bigger and better vacations later!

[ArcSine]

Under the right circumstances, excess cash + desire to grow is a combination that leads to buyout thoughts. Acquiring a similar company could be one way to fast-track your growth. In one pop you take on additional market share, customers, sales force, know-how, etc.

Natch, it's highly situation-dependent; definitely not a move that's advisable except under the just-right intersection of circumstances. Scores pretty high on the Risk-O-Meter, to boot.

Still, on the chance you happen to be sitting squarely in that just-right intersection, a small buyout of a similar / competing company might be an investment that translates most directly and quickly into some significant growth.

On a different tack, don't forget the right-hand side of your balance sheet when looking for productive places to park your excess cash. Paydown of some debt would produce an investment return that beats the 1% yield on that CD. And if you're pretty sure you could re-borrow it again if needed, it might be a good way to earn a better return (than the CD) while waiting on an attractive investment (such as a buyout, or a small office building) to present itself.

Just a couple of thoughts, and congrats on having such an enviable problem!

[TomWbl]

As mentioned congratulations on reaching an enviable position.

Some good ideas have been suggested also consider giving a one time bonus to your top employees. Above all however make sure your 'emergency' fund is full.