How reinvesting profit into growth compounds over years.
Inputs
$1 in produces $X.XX of revenue
Trajectory
Month
Revenue
Profit
Reinvested
vs No Reinvestment
Summary
End-period revenue
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Cumulative reinvested
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Cumulative profit (kept)
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About this calculator
The compounding effect of profit reinvestment is the closest thing to a free lunch in DTC. Each dollar reinvested at positive return generates more revenue, which generates more profit, which generates more reinvestment capacity. At 30% reinvestment ROI sustained over 24 months, businesses double or triple in size from this dynamic alone.
This calculator models month-by-month: current revenue × margin = profit. Profit × reinvestment % = redeployed cash. Redeployed × ROI = new revenue added next month. Compound forward. The compounding curve gets exciting at month 12+ where the base has grown enough that reinvestment dollars are meaningfully large.
Where this breaks: channel saturation. The math assumes constant 30% reinvestment ROI, but real channels show diminishing returns as audiences exhaust and competition rises. Account for this by using a conservative ROI assumption (25-30% rather than the 50%+ early-stage operators sometimes see) and testing for ROI degradation as you scale.
Pair with the Cash Flow Runway and Monthly Burn Rate calculators. Aggressive reinvestment requires cash discipline — running out of working capital while reinvesting is a fast way to insolvency, even with healthy unit economics. Maintain a runway floor.
Frequently asked questions
How much profit should I reinvest?
Early stage (under $1M revenue): reinvest 80-100% of profit if cash flow allows. Growth stage ($1M-10M): 50-70% to balance growth with founder draw. Mature ($10M+): 30-50%, with rest distributed as profit. Aggressive reinvestment is harder later because the dollar base is bigger.
What's the typical return on reinvested profit?
For DTC ecommerce, $1 reinvested into ads at target ROAS produces ~$0.20-0.40 of contribution margin (after CAC and COGS). At 30% reinvestment efficiency, $1 reinvested becomes $1.30 of revenue per cycle, compounding monthly.
Should reinvestment go all to ads?
No. Diversify. 60-70% to performance marketing (immediate ROI). 15-25% to inventory expansion (capacity to scale). 10-15% to brand/team/infrastructure (longer-term capacity). All-ads reinvestment hits diminishing returns fast.
When does reinvestment break down?
When channel saturation hits. Each $1 reinvested into the same paid social channel produces less return as audience exhausts. Watch CPA over time — if CPA rises 30%+ year-over-year, you're past the channel's efficient frontier and need new channels.
How do I know if I'm reinvesting too aggressively?
Cash flow stress. If you're constantly chasing payroll or supplier payments because every dollar gets redeployed, you're too aggressive. Maintain 3-6 months of runway as a floor below which reinvestment stops.