Turning a profit with your small business is an incredibly rewarding feeling for an entrepreneur. Having disposable business income relieves financial stress, secures the long-term health of your business, and is proof that the strategies that you have employed in your day-to-day operations have made your company successful. However, deciding how to invest the profits may prove to be a bit more difficult. As a small business owner, you know that every dollar you spend within your company is an important decision. This guide to investing profits from your small business will examine seven investments that you can make that will benefit your enterprise long term.
Investing in Your Business is Important
According to Biz2Credit, while it can be tempting to simply save the profit that your business is generating or pay yourself a higher salary for all the hard work you have done to make your company profitable, investing in your business is an important part of your long-term growth. In order to add members to your team, reach new clients, and expand your operations, putting a portion of profits back into your business is a crucial practice. Below are some great areas in which you can invest.
Purchase New Equipment
If your business relies on machinery to produce a product, investing in new equipment may be a good option for you. Purchasing equipment that produces a higher-quality product, saves time, or is easier for employees to use may increase your long-term profit margin by saving time and manpower. Even service-based businesses can benefit from the purchase of new equipment, such as computers and customer relationship management (CRM) software to streamline operations.
Hire a New Staff Member
Hiring a new staff member is a great way to scale your business and take some work off of your own plate. Especially if the new employee you hire has specialized skills that your existing team does not possess, bringing a new person onboard can help your business reach new heights, and can free up your own time for the parts of your business at which you excel. If hiring a full-time employee is not an option for you, you may want to consider outsourcing the parts of your business you do not enjoy, such as financial management, to a third-party company. Please do not hesitate to contact Affordable Bookkeeping and Payroll Services if you feel that outsourcing your business’s finances may be the right fit for you.
Invest in Employee Training
A well-trained employee is an asset to any business owner. Training your staff to learn a new skill or program, or simply on how to provide excellent customer service, has long-term returns that are worth tenfold what you invest in the training itself.
Start a New Marketing Campaign
You can also use some of your profits to start a marketing campaign to reach new clients or customers. Spending money on advertising provides a great return on investment (ROI), since you are generating business with your finances.
Hire an SEO Team
If your business is online, consider outsourcing your company’s SEO, or search engine optimization, to make sure that potential clients are finding you when they search for the services you provide.
Pay Off Debt
Paying off your business debt allows for more financial freedom in the future. However, you do want to make sure that you will not be hit by an early-exit penalty, and that the interest that you will save by paying a loan off early is worth the lump sum investment.
Solve Future Cash Flow Problems
Of course, saving a portion of your proceeds for a rainy day is also beneficial to your business. Having extra funds in your coffers can help you avoid future cash flow problems and bring you peace of mind in regard to your business’s financial health.
Whether you are bringing a new team member into your workplace, reaching new clients through SEO and marketing efforts, or simply saving profits for future use, investing the profits of your small business wisely is a great way to advance your business goals.
As always, it’s important that you discuss any significant investment plans with your financial professionals to understand any impact on taxes these decisions may bring. If a decision to invest is made, knowing the right timing is imperative as well. If you don’t yet have a CPA with whom you can discuss these issues, reach out to us for a referral to someone we know and trust.