Profit Reinvestment Compounding
Calculator
Results
- Ending annual profit
- $665,538.90
- Cumulative profit distributed
- $2,527,017.85
- Doubling year
- 8 yr
- Effective annual growth
- 12%
Projected path over the horizon
- Annual profit
- Cumulative profit distributed
Period-by-period projection
| 1 | 240,000.00 | 96,000.00 | 144,000.00 | 144,000.00 |
| 2 | 268,800.00 | 107,520.00 | 161,280.00 | 305,280.00 |
| 3 | 301,056.00 | 120,422.40 | 180,633.60 | 485,913.60 |
| 4 | 337,182.72 | 134,873.09 | 202,309.63 | 688,223.23 |
| 5 | 377,644.65 | 151,057.86 | 226,586.79 | 914,810.02 |
| 6 | 422,962.00 | 169,184.80 | 253,777.20 | 1,168,587.22 |
| 7 | 473,717.44 | 189,486.98 | 284,230.47 | 1,452,817.69 |
| 8 | 530,563.54 | 212,225.42 | 318,338.12 | 1,771,155.81 |
| 9 | 594,231.16 | 237,692.46 | 356,538.70 | 2,127,694.51 |
| 10 | 665,538.90 | 266,215.56 | 399,323.34 | 2,527,017.85 |
Comparison
| Scenario | Ending annual profit | Cumulative profit distributed |
|---|---|---|
| Doing nothing | 240,000.00 | 2,400,000.00 |
| Your scenario | 665,538.90 | 2,527,017.85 |
Formula
P_(y+1) = P_y·(1 + k·ROI), where k is the reinvested share= 665538.90
Note
Simplified model: this is the exact arithmetic of the stated recurrence applied to your inputs, with every rate held constant for the whole horizon. Real businesses see growth, churn, seasonality and costs move, and no projection accounts for competition, financing terms, tax or one-off events. Treat the crossing month as an order of magnitude, not a date, and check it against your own books before committing money.
More in Business projections
See all →Frequently asked questions
What does the reinvestment rate actually control in this model?+
It's the share of each period's profit that gets plowed back into the business (inventory, equipment, marketing, hiring) instead of being taken out as owner distributions. A higher rate compounds growth faster but leaves less cash in your pocket in the near term, so the number is a lever, not a fixed fact about the business.
Why does the ending value grow faster than a straight-line projection would suggest?+
Because reinvested profit doesn't just sit there, it generates its own additional profit in the following period, which then also gets partly reinvested. This compounding effect means the difference between reinvesting 30% versus 50% of profit is much larger after three years than a naive projection would show, since it snowballs.
What's the biggest misconception people have about this calculator's output?+
That the projected growth rate is guaranteed rather than assumed. The calculator compounds whatever return-on-reinvestment rate you enter, but that rate depends on the business actually finding productive uses for the extra capital — a second location, more inventory that sells, better marketing — not just banking the cash, which would compound at a bank rate, not a business growth rate.
How do I pick a realistic return-on-reinvestment assumption?+
Look at your business's historical return on invested capital: how much extra profit did each dollar you previously reinvested actually generate the following year? Using your industry's typical growth rate as a starting point is reasonable, but if you don't have a concrete plan for what the reinvested money buys, assume a conservative rate rather than an optimistic one.
Should I reinvest 100% of profit if the calculator shows that maximizes growth?+
No — the calculator shows compounding growth in isolation, not your personal or business cash needs. Reinvesting everything leaves no buffer for slow months, taxes, or emergencies, so most small businesses should set a reinvestment rate that still leaves an adequate cash cushion and covers owner draw, then compound with what's left over.