Making a small business big is the dream of many entrepreneurs. There are many who have made it. When Jeffrey Bezos started Amazon, he may not have imagined that Amazon could have grown to the proportions it is these days, and neither did Steve Jobs. These business giants started from humble beginnings, Bezos from his garage, and Jobs from his family home’s garage. The one question that may pop up as you read this would probably be “How do I grow my business from small to big?” The answer is pretty simple: strategic investments. Small business owners need to know the way to invest wisely and diversify their funds in order to gain financial stability. There are many ways to strategically invest in order to help your small business grow.
Balance between outside investments and your business
Can a business invest in another business? Can a private limited company invest in another company? The answer is, of course, you can! As a matter of fact, it is wise to invest outside your industry to avoid losses within the industry in case of a market downturn. However, you should still put some money aside to reinvest in your company’s growth. It is imperative that small business owners understand this balance. It is true that your net worth may be tied up in your business, however humble it may be. While reinvesting in your business should be a priority, you may wish to consider investing in other options, like in other companies through the stock market, which may allow a better risk-adjusted return of investment.
Have a disaster recovery plan/emergency fund
Before starting to invest, set up an emergency fund that you can use in the event that the need arises. This way you won’t need to touch your investment or savings account. Investing in a formal disaster recovery plan and business interruption insurance has saved many SMEs from going under. Natural disasters and uncontrollable situations, like the COVID-19 pandemic are unprecedented and can ruin a business for good. Having good insurance coverage is a good way of protecting the business from total loss.
While it is highly tempting to stick with what you know, it is a wise idea to diversify your investments and invest away from your business’ industry. The tendency to invest in the same business’ industry is called familiarity bias, and it may add exposure risk in case of industry-specific market downturns. By all means, you may wish to reinvest part of your profits back into your business, but do consider investing the rest in a diversified portfolio. By doing so, you may complement your concentrated risk exposure, instead of adding to it.
Invest in yourself, your people, your office, and your business
How to find investors for your business? Invest in your greatest asset to make your business more attractive. You are your greatest asset, as you are the face of your enterprise. Therefore, invest in yourself. Take courses that allow you to become a better player in your industry. And when you have the capacity to, do the same with your employees with training programs. Take time to interview those who have the skills as well as the willingness to grow and expand with the enterprise. And retain these people. Spend a little more on compensations and benefits. Happy workers rarely abandon ships easily. If you’re set for the long term, invest in a small office building. You can greatly save costs on rental, which you can reinvest and help your small business grow.
As a small business owner, you should understand how to invest your finances properly in order to expand your company, improve earnings, diversify, minimise risk, and maximise your potential for returns. To increase your profitability, it’s critical to be open to new ideas and experiment with alternative tactics. Keep asking questions — how to invest in your business, how to find investors for your business, how to grow your small business — and you may find answers that inspire you to evolve your enterprise in a way that is uniquely yours.
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