Building a successful business takes more than an idea and some seed money. As many as 20% of businesses fail within their first year, and only around half make it to the five-year mark. In order to turn a solid concept into a sustainable enterprise, business-owners need to invest intelligently. The details of where, when, why and how businesses choose to invest largely determines their longevity. With the right choices and some smart planning (like learning how to get a small business loan), budding enterprises create opportunities that multiply their revenue. With the wrong choices, however, a business can sink under unwise investments.
One option is to forego spending on anything except the most basic business costs. This can spare a company the consequences of the wrong investments, but it also makes growth difficult or impossible. Businesses that want to get bigger in any sense have to literally spend money to make money.
The best strategy is to invest enthusiastically but intelligently. That means striking the right balance between risk and reward while exercising equal amounts of courage and caution. It also means learning how to get a small business loan at the right time. Every business will invest a little differently, but most rely on similar strategies and hope for similar results. If you’re ready to invest in your business potential and see the biggest ROI, follow what has worked for others:
Address Your Weaknesses
What are your biggest obstacles to growth? It could be a lack of equipment, not enough space, outdated technology or worn-out work vehicles – anything keeping the business from realizing its full potential. These weaknesses are the most obvious thing to invest in, but they can’t be the only areas you invest in. Addressing weaknesses only makes your business better at what it does now. Reaching the next level requires new investments. Most business owners realize this, but it’s easy to fall into the trap of thinking about investments as “fixing” things and missing opportunities elsewhere.
Put Money in Marketing
There’s no business on earth that won’t benefit from the right marketing. Too many small businesses assume that marketing is unnecessary or impossible. There are also some who invest in marketing initially then let the effort fall by the wayside. Both cases can benefit from investing strategically in marketing – it can introduce your business to new customers and help you emphasize your current strengths and selling points. Digital marketing is both affordable and effective, but there are countless other channels to consider. If you already have a marketing budget, consider investing in something above and beyond – your first TV commercial, ads in other markets or a great email campaign.
Invest in Talent
Employees are the foundation of most small businesses. Spending money to help your team do their jobs more efficiently, productively or intelligently makes a lot of sense. In many cases, the best investment is to hire someone new that can add a skill to the team or relieve the workload for everyone else. Other businesses opt to pay for training and education, or to invest in employee morale by paying for a group trip. Over the long-term, deciding to put more money into employee benefits can help the business keep its best employees and attract the best additions.
Growing a business often means becoming smaller and leaner. When businesses decide to invest in outsourcing – by sending their accounting or HR responsibilities to someone else, for example – they free up time and resources to focus on the core of the business. In many cases, outsourcing costs less than performing the same service in-house. Quality improves as well because the work is being handled by highly-coordinated professionals instead of whoever you’re able to hire. Many small business owners are understandably put off by the idea of outsourcing existing jobs, but it’s also an alternative to adding more staff members. When businesses need to fill a new role, relying on some kind of outsourcing may be cheaper and much faster than hiring a full-time employee.
Important as it is to invest intelligently, businesses also have to keep some money in the bank. Cash flow issues can appear suddenly and unexpectedly, and when they do, savings provide a way to weather the storm. Investing everything you have on hand can leave your business without a financial cushion and, as a result, highly vulnerable. Saving is important, but there are ways to be strategic about it. One smart path to getting funds in the bank is by learning how to get a small business loan. Instead of keeping large amounts of cash on hand, you can get a loan only if and when it’s necessary, freeing up a lot of extra capital for investment. Alternatively, you can funnel more of your profits into savings and rely on various financing options to fund your investments.
Form a Financing Partnership
Arguably the most intelligent way to invest in your business potential is to rely on outside funding sources. Think of it this way – the amount of cash you have on hand might not always match the opportunities you have in front of you. When that happens, you will want to have a financing partner in place who can extend you a loan, equipment financing, credit or whatever other resources you might need to seize the day. Many opportunities have a short window, which is why it’s smart to form a financing partnership early, before you actually need financing. The right partnership can be a lifeline when you need it, as well as a serious supporter of growth throughout the entire life of your business.