Running a small business requires diligence and fiscal responsibility. Owners also need to be able to use their capital, or money left over after paying off all of their bills and overhead, to make money. If a business has their money working for them, they’ll be in a better position when it comes time to invest in the business or buy new equipment.
How can small businesses start investing their capital?
1. Invest in Your Own Operations
Small businesses need to continue to reinvest in their own businesses. But a lot of owners will start to use their revenue to cover their own bills. The problem is, especially during the formative years of business, businesses need to reinvest in their operations.
How much should you reinvest?
Some suggest 50% of more of your earnings should be flipped back into the business.
Reinvesting can be on a variety of things:
- Content for your blog
- Website redesign
- App development
Generating revenue means that you must invest in your own operations. If you’re not reinvesting, you’re causing stagnation in your business.
2. Savings Accounts for Businesses
Want to be able to make your money work for you with as minimal risk as possible? A business savings account is a good option. These accounts have low-interest rates, but they can make your money work for you no matter how little this may be.
It’s better to keep money in a savings account than it is to let it sit in a checking account not earning you any money.
You’ll be able to find a savings account at your regular bank, and while this may be a lower return, it’s better than your money making no money.
3. Invest in Startups or Acquisitions
You may be tempted to start investing in stocks and mutual funds, but this can be a very high-risk venture. Trading for beginners offers higher risks than most businesses should take on. Startups and acquisitions are definitely a smart investment when you have money to spare.
The key is to invest in companies that you understand.
Let’s assume for a minute that you’re a small computer repair shop, and you’re growing dramatically. You may choose to purchase or invest in a mobile computer repair operation. You understand the niche, and this makes it easier to turn profits on the investment.
If your business is in a good position, you may also opt to acquire other companies. While this is a large undertaking, acquisitions offer a way to expand your business and enter new markets quickly.
4. Invest in Yourself or Employees
Invest in yourself or your employees. Pay for training, certifications or schooling so that you or your employees can offer specialized services. Education is never a bad investment, and it will allow you to offer a service that is better than the competition.
Investing in yourself is always a good investment.
But if you have money sitting there that’s not making you any money, it’s time to invest it in ways that will make you money.