Profit Reinvestment Calculator

Tax comes out before reinvestment.

Tax comes out before reinvestment. Tax comes out before reinvestment, which is the step most owners skip when planning growth from retained profit.

Written and maintained by Mohit PatelLast checked August 4, 2026How we build these

Currency

Monthly profit

Share reinvested

Monthly return on reinvested capital

Months to project

Tax on profit

Reinvested per month

$7,938

$3,402 taken out

Profit after tax$11,340

Reinvested$7,938

Drawn$3,402

Capital built in 24 months$200,901

Tax comes out before reinvestment, which is the step most owners forget when planning growth from retained profit. Reinvesting the pre-tax figure produces a shortfall exactly when the tax bill arrives.

How the Profit Reinvestment Calculator works

Tax comes out before reinvestment, which is the step most owners skip when planning growth from retained profit. Reinvesting the pre-tax figure produces a shortfall exactly when the tax bill arrives.

Also known as: how much profit to reinvest · reinvestment rate calculator · growth funding from profit

How much of the profit can actually be reinvested

Profit is not the amount available to reinvest. From it come tax, any loan principal repayments, and the working capital needed to support the growth the reinvestment is meant to produce.

Corporation tax is the first deduction and it is due whether or not the cash was spent. Reinvesting the full profit and then discovering the tax bill is a well-worn route to a difficult January.

Then the working capital claim. Growing sales requires more stock, and that stock has to be funded before the additional profit arrives. Reinvestment plans that fund advertising without funding the inventory to serve the resulting demand produce stockouts, which is an expensive way to spend a marketing budget.

Where reinvested profit goes

Inventory is the default for most product businesses and often the right one, because it directly supports revenue. The constraint is that it only works if the stock sells; buying more of a slow line converts cash into a storage problem.

Advertising is the second and the most measurable. Its advantage is that it can be turned off, which makes it lower risk than any commitment. Its disadvantage is that it stops working when it stops being paid for.

Then the durable investments: better photography, a range extension, a systems improvement, a first hire. These compound rather than converting, and they are harder to justify because the return arrives later and is difficult to attribute. Businesses that reinvest only in stock and advertising tend to grow to a size and stall, because neither of those changes what the business is capable of.

Growth rate against funding

There is a maximum growth rate a business can fund from its own profits, and it is calculable. It depends on the margin, the working capital cycle and the reinvestment ratio.

The mechanism is straightforward. If each pound of additional annual revenue requires 20p of additional working capital, and the business generates 8p of reinvestable profit per pound of revenue, then it can fund roughly 40% annual growth from profit before needing external money.

Exceeding that rate is not forbidden and it does require funding from somewhere: borrowing, investment, or supplier terms. Businesses that grow past their self-funding rate without arranging it discover the constraint as a cash shortage rather than as a plan, usually at the point where an order needs paying.

Keeping something back

Reinvesting everything is the instinct in a growing business and it removes all resilience. A reserve is not idle money; it is the thing that lets you survive a supplier failure, a platform suspension, a bad season or a large unexpected bill.

Three months of fixed costs is a common target and a reasonable one. For a business with £9,000 of monthly fixed costs that is £27,000 held rather than deployed, which feels like a lot until the month it is needed.

The tax reserve is separate and non-negotiable. Corporation tax and VAT are collected or accrued on money that passed through the business and are owed regardless of what happened to it. Holding them in a separate account is the simplest financial discipline available and it prevents the most common cause of insolvency in otherwise viable small businesses.

Measuring whether it worked

Reinvestment should be measured against a return, and the measurement should be decided before the money is spent rather than after.

For inventory, the measure is sell-through and margin on the specific stock bought. For advertising, incremental contribution rather than attributed revenue, which is a harder measurement and a more honest one. For durable investments, a stated hypothesis about what will change and a period over which to check.

The discipline that matters is writing it down. Reinvestment decisions made without a stated expected return cannot be evaluated, and businesses that never evaluate them keep making the same allocation year after year regardless of whether it is working. The measurement is more valuable than the precision of it.

Where to go next

The Profit Reinvestment question rarely arrives on its own. These are the ones that usually come with it:

Business ROI Calculator — Annualised, and with a present value beside it.
Operating Cash Flow Calculator — Profitable but broke, quantified.
Runway Calculator — Growth extends it, if the growth holds.
Etsy Fee Calculator — Every Etsy fee on one sale, itemised.

Not financial advice. Marketplace fees change, and they vary by country, plan and seller status. Every rate here is an editable default, not a quoted price, check the platform's current fee schedule before you price a product against it. This is not tax or business advice.

Frequently asked questions

How much profit should I reinvest?

Whatever the growth plan requires and the owner can afford to leave in. There is no right ratio, the constraint is usually personal rather than financial.

Why does tax timing matter?

Because tax is assessed on profit whether or not the money is still in the business. Stock bought with pre-tax profit is not deductible against that profit, and the bill arrives regardless.

What return should reinvested profit earn?

More than the alternatives, including simply taking it out. Reinvesting into a business earning 4% a month is compelling; reinvesting into one earning 4% a year is not.

How do I balance drawing and reinvesting?

Set a fixed drawing that covers personal needs and treat everything above it as a reinvestment decision. Variable drawings tend to consume whatever is there.