Smart entrepreneurs invest business profits wisely to minimize loss. This ensures that even though the money is being spent, it is spent in ways that enable business growth, which, therefore, allows the value of the business to appreciate. Minimizing losses increases profit-making potential as scarce resources are being put to good use. A vast majority of entrepreneurs, 80% to be precise, fund their enterprises out of pocket, and managing cash flow is a major challenge as most have no prior business cash flow education. But you don’t have to be a part of this statistic. After you make your first turnover, making these smart financial decisions will help you make the most of your hard-earned money.
1.Investing in fixed assets
Investopedia defines an asset as an economically valuable resource owned, controlled, or acquired with the expectation that it will appreciate later. A fixed asset is an asset acquired to liquidate at a later period. It is expected to appreciate so that you can cash in on the benefits. A simpler explanation will be to save up money but not in cash, which can be affected by inflation. Important fixed assets an entrepreneur should invest in as a business, include furniture, and land. These assets appreciate over time, and when managed properly, can make you some great benefits. It will be much more beneficial to your business to own property that would be making you money in the long run and aiding business operations simultaneously.
Fixed assets require efficient maintenance to ensure that your investment is protected. In the case of concrete structures, you could have a periodic assessment done on your building by experts like K&E Flatwork so that any damage beyond normal wear and tear is remedied as soon as possible to prevent asset value from depreciating. Keep your sidewalks and parking lot in mint condition as well. A well-maintained building and environment is easier on the eyes and markets your business better to a potential customer.
2. Buying the right insurance
Insurance on your property, car, and health is an added layer of protection to your assets. Many state laws require all property owners to take out adequate insurance in the event of an unfortunate occurrence. Fire, earthquakes, or even accidents could cost property owners a lot of money in uninsured. Your business could take a hit as a result, and this would be a waste of money as well as an unnecessary business opportunity cost. Take time to research property insurance to understand how taking out one could work to protect property owners.
The importance of growing in your craft and building value through education cannot be over-emphasized because you are only as good as what you know. The entrepreneur, as the human resource, is the most valuable component in the profit-making process. So invest the money and time in bettering yourself so you can improve at building your business. You can take some courses in business analytics, economics, business communication, or even get an MBA. You can also acquire some marketing skills with a CIM so you can take advantage of the available marketplaces. Also, make it a point to frequently upgrade your qualifications when you get them. This is because there are always new ways of doing things. You’ll be able to keep up with the times, advance yourself and your business as well.
4. Investing in marketing
The notion that a good product by itself will drive traffic no longer holds. Many businesses struggle to retain their customers because they fail to invest in proper marketing structures early enough when they had the momentum. Strategically including ad expenditure on your budget saves you from being blindsided when you do need it. Diversify your marketing options by spreading your options so you can target different customer bases. Younger people are more likely to resonate better with social media, and older people are better reached with in-person marketing. Engage some extra help with in-person marketing campaigns so they can be even more productive. The business rewards will be worth the sacrifice.
5. Paying your debts
This may not seem so important on this list, but having debts is counter-productive to success. You cannot truly count your money as profit if you haven’t paid off your debtors. Owing people is also not a good identity to have. It could make it difficult for you to attract value investors as your credibility, which would be needed to build confidence in your enterprise, will be in question. So, come up with a debt repayment plan and pay off your debts at a convenient pace that would not leave you starving or homeless. Most entrepreneurs start up with loans from family and friends. Because of the personal relationship at stake, it is even more beneficial to you to pay your debts, so relations do not get strained. Some relations might even be willing to reduce your interest rate if you express interest in paying off your loan faster. This will imply increased business profits.
Get help with administrative duties and any other roles that are not your strong suit because productivity will suffer in the end if you attempt to do it all. Do not also go overboard with hiring too many people. This will cost you needless expenditure as you’ll be overspending where you could be saving. First, hire an administrator or secretary to help you stay on top of paperwork so you can focus on making business decisions. Also, invest in a trustworthy accountant. An accountant role goes far beyond the boring task of securing the money. They’ll ensure that your taxes are paid on time, so your business is in the clear with the government. They’ll also keep track of cash inflows and outflows so that you know exactly how much profits you are making.
Additionally, outsource work that you do not need to hire full-time staff to do. A typical example is janitorial and maintenance work. Cleaning and maintenance work are duties that can easily be outsourced to an agency if it does not need to get done every day. Observe your workspace and plan on days the cleaning can get done. If it is something you can get done easily without your plate getting too full, then, in this case, it would be better to do it yourself. The result, either way, will be efficient financial management and increased productivity.
As an entrepreneur, you always need to have a plan and a back-up ready to run despite having limited funds at your disposal. Spending your money in ways that benefit your business will help you make the most out of your venture.