Investment and finance are two crucial factors that can or unmake a business. They often go hand in hand. A healthy bottom line can be a central attraction point for any investment discussion for your business. The more you know, the less likely you are to make blunders that’ll drain your business. Even if you have all of Wall Street in your corner, it won’t hurt to be on top of efforts that keep your business afloat. Here are some vital investment and finance strategies for business owners.
Aim to be lean, not frugal.
Is there a difference? You bet. Frugality involves an economical use of resources, whereas lean management entails the utilization of value. Lean business owners reflect on expenditures and regularly evaluate purchases to determine the cost-cutting areas tied to more efficient outputs.
Take a small Canadian grocery store or fruit vendor, for instance. Being frugal in purchasing supplies might lead to ignoring a quality-guaranteed supplier for one whose only offering is selling cheaper goods. But a lean thinking approach can involve owner querying Google for the “best cash back credit card in Canada.” That way, the business can get some money off repetitive and new purchases with the cash-back card while still ensuring quality.
That being said, it’s worth noting that getting a credit card might require your credit report and credit score to be in good standing. It’s also worth checking the fees involved such as the foreign transaction fee, balance transfer fee, annual fee, as well as the monthly minimum payment.
All in all, spending less doesn’t necessarily translate into business value. Lean thinking can help you be frugal, but being cheap and using a piecemeal approach to cut costs might not be the best road to take.
Gig your workforce and outsource.
As a business owner, the chunk of your finances will be for employees—talk of salaries, office upgrades, training, and other forms of workforce investment. Hiring full-time employees and making related capital-intensive investments while cash inflow consistently stays low might not be efficient.
Sufficiency is a core expectation when running a business, irrespective of size or scale. Luckily, many companies increasingly realize the essence of gig working. Gigging your workforce means hiring the best talents without a full-time commitment. For instance, you can outsource CMO duties to Chief Outsiders or any other fraction service provider.
That way, you can get a Nike-level marketing job without the need to have Nike-level bank accounts. As a business owner, this can be the best investment for your business. And the related cost-cutting perks on full-time hires can also be hard to ignore.
Create an emergency fund.
Every business owner needs to be a good student of the COVID-19 pandemic and its effects. Recent years have shown creating a safety net for your business and yourself as an entrepreneur is no longer an indulgence. It has almost become a necessity. Often, most entrepreneurs make the mistake of tying up all assets together, whether personal or business.
Doing this opens you to a lot of risks. Just one slight change in investment can leave you and your business with nothing. So, it pays to diversify your assets. Focusing on investments in other sectors unrelated to your business can be a great way to ensure financial security for you and your business.
Have a retirement plan in place.
As an entrepreneur, doing what you love and seeing your ideas flourish can be a “high.” It can lead you to ignore critical decisions, including retirement. Retirement comes at you fast. And positioning yourself in a good place when it does is a much better option than waiting for it.
But unfortunately, many small business owners make several retirement mistakes. They wait too long until the only option becomes shutting the business down and taking the little left as a retirement bonus. If you have employees, having a retirement plan inclusive of their interests gives them more security to keep pushing your business up.
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