A Guest Post by Jenna Batten
Sometimes getting a small business off the ground can be such a complex and thrilling experience that once it’s up and running, the owner runs into a range of new problems related to financial management. Indeed, when starting a business, you can be so preoccupied with making sure it can function that you stop considering what you’ll actually do with the profits it generates (if it’s successful, that is). Well, if this has happened to you, relax. Plenty of small business owners struggle early on with financial management.
To some extent, this just means that there’s a learning curve when it comes to allocating funds appropriately—directing some cash flow to the sustainability of the business, paying employees, appropriately managing tax requirements. All of this alone can be a headache. But when a small business is actually profitable, there are also decisions to be made in terms of how to manage and invest the profits.
With that said, here are a few tips for small business owners looking to make the most of early profits via strategic investment.
1. Hire As Needed
Generally, hiring new employees can seem like a backwards step to small business owners who are reluctant to spend more money. After all, hiring means taking on additional salaries, and you certainly don’t want to make the company larger than it needs to be early on. However, there are certain positions that, when hired, effectively serve as investments in the company, saving you time and helping the business to run more efficiently. For example, as an article in the Houston Chronicle pointed out comprehensively, a human resources manager or department can help you to make sure you’re getting the most out of existing employees and new recruits. Also, if your business reaches a certain size, a CFO can be an invaluable hire for managing the very topics we’re discussing in this article!
2. Invest In Your Brand
This is a topic covered briefly by The Daily MBA in a previous article entitled 5 Things To Take Note Of To Avoid Business Failure. Specifically, the post discussed the benefits of establishing a brand name and differentiating your business from your competition. To some extent, this can be done with your own independent design, outreach, and performance. At some point, though, most small businesses have to invest in expanding a brand name through various types of marketing. With that said, this can tie into the first point when it comes to hiring a marketing director or team—or even a social media advertising specialist.
3. Invest Externally
This can be a risky prospect for a small business. However, if as the owner you have your own profits to work with, investing outside of the business itself can be beneficial. Generally, the idea here is to find simple, alternative markets that can be managed online at your own leisure (thus saving you the stress, fees, and complication of ordinary stock market investment). You can read up on the basics of some of these types of investments at FXCM’s insights page, where various forex trading markets and commodity markets are described. The idea in markets like these is to invest in resources to maximize value—whether that means trading euros and dollars against each other, buying gold or silver, and so forth. Some of these types of investment are viewed as long-term plays that can help protect financial resources, which can be appealing for a small business owner looking to make the most of early profits; however, each investment is still a risk!
4. Fund Future Projects
Finally, a small business owner can also make a very strategic “investment” by simply setting money aside. This can be difficult to do, because stashing money doesn’t give it the opportunity to grow or expand. However, it also helps you to avoid risk, and makes that money available for future projects, whether that means additional hiring, a new product or service launch, etc. Capital can be very hard to come by for a growing small business. While it’s generally a poor investment strategy to hide money where it can’t grow, that same money has the potential to save you from needing to take on loans or sell equity in the future!
There’s more to small business finance than simply reinvesting profits, and many businesses are lucky if they have the opportunity to make choices like these in the early going. But if you are profitable, these tips should help you to make the most of early revenue!