Growth should be a core part of the business plan of any organization serious about success. Whatever its size, a business should always be thinking about the future in order to stay relevant and competitive, and the future should always include a vision of growth.
This is a particular challenge for small businesses, which always run the risk of not growing beyond the size they were when they started up, and stagnating as a result. There are many examples however, of small businesses that bucked this trend and achieved remarkable growth against the odds.
Investment is critical to growth and small business owners must understand how various aspects of investment work. They need to have a good understanding of the options, tools and techniques available to them, as well as the advantages and risks associated with each, in order to make carefully informed decisions about the most appropriate ones for them, their business, and their ambitions.
Perhaps the most important first step when exploring investment tools and their various applications is to get some advice from a trusted source. This is not just helpful, it is invaluable. There is currently a wealth, some would say an excess, of material online and elsewhere offering advice on this subject and knowing where to start or how to cut through it to the most useful items is difficult.
Consulting professionals with expertise earned through years of practical experience will help make sure you achieve maximum profitability and the best returns through the application of the most appropriate tools and techniques for you and your business. It will also provide reassurance that risks have been reduced, as well as tax and legal obligations met, allowing you to focus your time and energy on actually running your business.
Before making any kind of investment, it is important to understand your net worth and Fisher Investments have a free guide to assist you in this matter. This knowledge and insight will provide a firm foundation for a range of personal investment decisions.
Investing in your own business can be a key step in the route to growth and while small business owners do not necessarily think of themselves as investors, more and more of them are making this move in order to facilitate such growth and achieve their ambitions. It is crucial to understand the implications of investing in one’s own business, so here are a few of the most commonly used investment techniques:
- Equity. This is generally believed to be the most common way for small business owners and entrepreneurs to invest in their new companies. While popular, there are challenges and disadvantages associated with this form of investment. Most significantly, the inflexibility with regard to liquidity, as the investment is tied up in such a way that converting it back into cash when required is not easy.
- Loans. As long as the company has a healthy cash flow and is likely to continue generating profit, investing in a company through a debt mechanism such as a loan provides more flexible options in terms of liquidity. Investment risk decreases in line with the business’s ability to pay back the loan.
- Combination. Some entrepreneurs choose to make their investments through a combination of both equity and loans, to benefit from the advantages and mitigate against the disadvantages of both approaches. This naturally introduces an extra element of complexity to the arrangement so it is important to seek professional advice in order to balance appropriately.
- Investing in batches. Small business owners, like venture capital funds, can invest in a number of batches rather than a single deal. This allows them to respond to their company’s current situation and requirements. It is also a means of reducing personal risk.
Investing in the future
Making the decision to invest personal savings in your business start-up is a bold, and perhaps daunting move, and there are of course risks attached, as there are with any kind of investment. It also breaks down the – sometimes very carefully constructed – wall between your personal and work life.
That said, small business owners are increasingly going down this route in order to help their business grow because the rewards are potentially huge, both personally and for the business as a whole. The key thing is to ensure that any decision made is informed by the best possible research and advice. By reading the right material, and talking to the right people, you will be preparing yourself for the best possible chances of success.