For many tobacco businesses, the final quarter of the year is dedicated to reviewing the year that’s passed and begin to make plans for the year to come. As you’re reviewing the books and are preparing for another year, how you handle your profits is a question that should be given some consideration. Every business aims to end the year in the black and while factors like FDA compliance or a rise in costs associated with bringing product to the market may limit profits, just how exactly will your business handle making a profit?
“Reinvesting back into the business is absolutely critical,” explains Glen Case, President of Kristoff Cigars. “More importantly, understanding where to invest to optimize your return, and divesting from those areas where there is no quantifiable benefit or simply does not meet the the return threshold.”
Besides saving profits for unanticipated expenses, here’s several ways your tobacco business could reinvest those profits.
1. Improve Your Workforce
Beyond rewarding your workers with a bonus, profits can be used to improve your company’s employees. Go beyond bonuses and use your profits to improve your company by providing new training and educational experiences for your workers. If you are a retailer, profits could be used to bring in an expert on age verification to ensure your business’ workers receive professional training that will keep you from being fined for violations. A manufacturer could offer its sales team with continuing education opportunities to help them expand their skillsets. To keep your employees happy and prevent turnover, you could use profits to offer new benefits your employees have been asking for.
2. Optimize Your Marketing Efforts
Is your company on social media? Are you producing video content featuring your company’s products and key personnel? What’s your digital marketing strategy look like? If you’re drawing a blank on any of these questions, you need to dedicate whatever profits you have to your marketing strategy. A small investment in social media or in improving your current marketing strategy could lead to more sales and even bigger profits in the year to come.
3. Invest in a CSR
If you’re in business only to make money for yourself, you likely won’t be in business for long. Every company should practice some form of Corporate Social Responsibility (CSR). This is an integral part of any business model and connects your company to its community and the world around it. Gurkha Cigars, Davidoff, British American Tobacco, ITG Brands are just a few of the tobacco companies that have some form of CSR built into their business models.
Profits could be used to fund various initiatives from supporting a charity to improving the lives of the farmers who supply your company with its tobacco. Read more about developing a CSR plan for your tobacco business by clicking here.
4. Invest in Your Time
Time is the most valuable asset a business has and yet often the most ignored. As famed American management consultant Peter Drucker once said, “Do what you do best, and outsource the rest.” Using profits to outsource tasks that drain you of your time and take you away from what you do best could be the smartest business move you could make. Perhaps it means hiring an accountant, a broker, a patent lawyer or an intern to take care of small tasks. “When you hire the right people you really get a return on investment,” says Sean Knutsen, President and CEO of Boveda, Inc.
Identify what you’re spending a lot of time doing and if it’s not your or your team’s strength, stop wasting time on it and use your profits to hire a professional to take care of it for you.
5. Create a Compliance Fund
It’s safe to assume the cost to do business in the tobacco sector is only going to get more expensive based on the U.S. Food and Drug Administration’s (FDA) User Fee Schedule for 2018 and the years to come [click here to read more]. For this reason, if your company doesn’t have a compliance fund setup to handle the many FDA compliance steps, you can’t afford not to set aside your profits in a special account dedicated to staying compliant and in business.
– Story by Antoine Reid, an editor and digital content director for Tobacco Business Magazine. You can follow him on Instagram @editor.reid