Small business success is no guarantee. However, with the right approach, small business owners can get the most value out of their investments.
Investment management is rarely simple. Fortunately, there are several things that small business owners can do to manage their investments with precision and care. From here, these business owners are well-equipped to grow their existing investments. They may also discover new investment opportunities.
Here are five tips to help small business owners manage and optimize their investments.
1. Partner with a Financial Expert
Seek out a third-party financial expert who can explain the ins and outs of investment management. For instance, a small business owner can hire an investment manager with strong verbal, analytical, and problem-solving skills. This manager can review a small business’s investment portfolio. Next, the manager can provide personalized investment tips, recommendations, and insights.
For small business owners that want investment help on staff, hire a financial manager. This professional can handle small business investment management, create budgets, oversee accounting tasks, and perform other financial duties. As such, a CAO can manage a small business’ finances now and in the future.
2. Establish an Investment Strategy
Examine myriad investment strategy options. Common investment strategies used by small business owners include:
- Top-Down: Investments are selected across a broad spectrum, such as a specific industry or market.
- Fundamental: An evaluation is performed to analyze all factors that can impact an investment’s performance.
- Contrarian: An investment is chosen based on the fact that it goes against the market’s consensus.
Weigh the pros and cons of different investment strategies. Keep in mind that there is no one-size-fits-all approach to investing. Conversely, a small business owner should choose an investment strategy that instills confidence. This strategy should also ensure the owner feels good about their chances to maximize their ROI.
In addition to establishing an investment strategy, a small business owner should prioritize contingency planning. That way, if an investment strategy does not deliver the intended results, a small business owner can implement their contingency plan. Then, the owner can keep their business operational.
3. Explore Growth Opportunities
Conduct a market analysis. Use the analysis to determine how a small business stacks up against the competition. At the same time, the analysis can help a small business owner identify and capitalize on growth opportunities.
Furthermore, utilize customer satisfaction surveys. A small business owner can distribute these surveys to customers to get insights into how they feel about their brand’s products, services, and support. The owner can use these insights to discover ways to improve its offerings and operations. As a result, the owner can identify opportunities to invest in the growth of their business. And the owner can help their business provide the products, services, and support its customers deserve.
4. Consider Alternative Investment Opportunities
Resist the urge to focus exclusively on “safe” investments. Rather, small business owners should consider alternative investment opportunities such as:
- Real Estate: A small business owner can leverage a real estate investment trust (REIT), which provides income-producing property. Or, a self-directed real estate IRA can deliver a large return if the property associated with it appreciates in value.
- Precious Metals: Gold, silver, and other precious metals can be purchased outright. Comparatively, small business owners can use gold-exchange traded funds (ETF) or stock options to invest in companies that mine and produce precious metals.
- Private Equity: Small business owners can invest directly in companies that are not publicly traded. They can also utilize private equity ETFs.
- Non-Fungible Tokens (NFTs): NFTs transform digital works of art and other collectibles into unique, verifiable assets that can be traded on a blockchain. Many big brands have already invested in NFTs. Meanwhile, small business owners can do the same and watch their NFTs gain value over time.
Alternative investments can be risky. Thus, small business owners should evaluate these investments carefully. In doing so, they can find the right combination between different types of investments and choose ones that deliver long-lasting results.
5. Perform Ongoing Investment Evaluations
Collect investment data and analytics. Small business owners can perform periodic investment evaluations based on several criteria:
- Payback period
- Internal rate of return
- Net present value
Assess short- and long-term investment goals and how to achieve them. For instance, frozen food manufacturers are thriving during the COVID-19 pandemic. Small business owners who invest in food and beverage companies may experience immediate returns. But as the pandemic approaches its conclusion, these returns may dwindle.
Involve multiple business stakeholders in investment evaluations as well. A small business owner can review their investments with partners and other stakeholders. Together, these individuals can determine what investments can deliver the optimal returns for many years to come.
The Bottom Line on How to Manage Investments as a Small Business
Small business owners generally have limited funds at their disposal. Regardless, they should be ready to make investments. Because with the proper investments, small business owners can drive revenue growth.
To get started with small business investing, craft a strategy. A small business owner can then fine-tune this strategy and modify their investments as needed.
Ultimately, small business owners should take investment management seriously. Those who proactively manage their investments can identify growth opportunities and avoid mistakes. Perhaps best of all, they can continuously examine their investments and ensure they consistently provide outstanding returns.