Many businesses naturally undergo ups and downs. There will be episodes of a great boom while others will be sluggish. This is usually precipitated by various factors such as prevailing economic conditions, changing consumption patterns, and internal factors, among others.
If your business is making a killing and enjoying a period of tremendous success, you should take advantage of such times to compensate for low periods. Here are five tips on how you can make the most of small business success.
Manage Your Personal Debts Better
Personal debts can cripple your progress if there is a huge cash outlay to settle personal debts such as a mortgage or student loan. If your business has started raking in huge sums, it is an opportune time to resolve any outstanding loans.
If possible, you can consider paying a considerable sum to significantly offset the principal balance. You can also consider a recast mortgage option if you are servicing a mortgage loan. Your lender will recalculate a new amortization based on the new balance, possibly reducing the monthly repayments or repayment period.
Reinvest Some Into Your Business
If your business is doing well, this should be a golden opportunity to reinvest some money to improve operational efficiency or expand your business to reach new markets. You can channel some money to areas such as advertising and marketing, external acquisitions, capital improvement, or hiring new employees. However, this has to be commensurate with your business growth stage.
There is no need to stock many new products if you do not have enough demand. The expansion has to be in tandem with your growth prospects and other key economic indicators.
Create a Cash Buffer
One of the ways you can ensure that your business runs smoothly in the long run is by creating a cash buffer for emergencies. As an entrepreneur, you need to realize that unforeseeable events can adversely affect your business. For instance, a disaster can strike, and you find yourself between a rock and a hard place. If you had not formed a habit of putting some money aside for a rainy day, your business could hurt if a disaster happens.
Now that your business is generating a lot of cash, creating a cash buffer is advisable. A cash buffer will help you meet financial obligations like paying your suppliers and employees.
Invest in Financial Markets
You can invest the excess cash in financial markets such as stock or bonds. Instead of keeping money in the bank, why not buy shares or bonds to boost your earnings? You can invest in treasury bills or government bonds and earn interest.
If you want to invest in stocks, you need to do a bit of research to avoid investing in the wrong stocks. Do an excellent analysis to establish the underpriced stocks or those that are promising to appreciate. Some investors make the mistake of buying overpriced stock only for the prices to slump. Stocks are underpriced if their intrinsic value is higher than the prevailing prices.
Nevertheless, sometimes it’s hard to establish the actual value of a stock. In such cases, you can diversify risk by buying shares from different companies to create a diversified portfolio. If you have set aside some money for contingency and still have some more to spare, financial markets can be an excellent investment to boost your wealth.
Reward Your Employees to Motivate Them
Probably you have heard an adage that a happy employee is a satisfied customer. Don’t forget that employees are the greatest assets. Without your employees, you will not be able to meet your financial goals. If you take care of your employees, they will reciprocate the same to your customers.
If your business is witnessing humongous success, it’s good to reward them to motivate them to do even more. You can do this by increasing their salaries or giving them a token of appreciation. If you are going to go far in your business, you have to keep your employees happy and motivated.
When your business is winning, it is good to show your employees that you are winning together by rewarding them.