Choosing the right investments for your business can generate growth or stifle it without the right strategy in mind. Every company’s goals and trajectory are different, but there are a few core tips you can use to help guide your investment choices.
Choosing your business’s next investment is about staying anchored in your goals and putting financial resources toward the right stepping stones to reach those aims. Here’s an overview of some top considerations you should have in mind when planning your business’s investments for the future.
Consider Long-Term Plans
The first thing you should do when trying to choose your business’s next investment takes a look at how you are hoping to grow. It can help to lay things out over the next five to 10 years. Consider where your company is and how far you could reasonably progress toward your hopes in the near future.
For example, maybe you currently run a small construction business. In five years, you might want to have a larger team, take on more projects annually or operate over a larger area. In 10 years, you might want to own your own vehicles and equipment or take on larger-scale projects. These goals are ambitious and motivating while also remaining realistic and achievable.
Your long-term plans for your company serve as a road map for where you should invest your money now. An investment might sound attractive at first glance, but it might not be a good fit if it doesn’t align with your long-term vision. Think of your five to 10-year goals as your travel itinerary for a road trip — it’s alright to take detours now and then, but each step along the way should move you toward your ultimate destination.
Save for Worst-Case Scenarios
It may sound grim initially, but planning for worst-case scenarios can help save your business stress and money in the long run. Investing in disaster recovery resources could potentially save your company in the event of a natural disaster or cyber attack. Disaster recovery investments will vary for different businesses and different areas.
For example, imagine a coffee shop based in Orlando, Florida. Business owners in Southern Florida are all too aware of the dangers of hurricanes. There may not be any way to stop these natural disasters, but business owners can make critical investments to help them recover faster afterward.
If you owned this coffee shop, you might want to invest money in a securities stock, where you could leave your money to grow over time with minimal risk of losing any. In a disaster, you could pull that money out of the stock market and use it to help cover damages and other recovery expenses. There are a variety of online tools you can use to research good stock investments like this.
Similarly, you might buy backup storefront gear for your coffee shop that you could store in a safe location. This would allow you to reopen quicker after a natural disaster like a hurricane, where property destruction could be a problem. Organizing emergency clean-up services ahead of time could be another good investment for quick storefront recovery after a storm.
Remember to consider financial fallout, as well. For example, you might invest in a real estate entity that ends up falling through. Having the possibility of a 1031 exchange for that investment could help save you hefty tax payments when backing out of the investment. It might sound pessimistic to arrange worst-case scenario plans like these — hopefully, you don’t have to use them. However, you will be glad you have these disaster preparations in place if worst comes to worst.
Consider Personnel Investments
In addition to physical investments, it’s always a good idea to consider investing in new team members or contractors. Part of being a growing company is recognizing when you could benefit from something your team is not currently doing and responding to that.
For example, you might see a lot of potential in content marketing, but your company doesn’t currently have a team member with strong content marketing skills. You could invest in a freelance content writer or a training program or course for one of your team members to learn content writing skills. This investment would deliver a return in the form of improved marketing for your business.
It’s also worth asking your team members what skills they would like to learn or what help they could use on the job. Employees will have a unique perspective on everyday life in your company, including things you might not be aware of. Their input can help guide your personnel investments to meet your workers’ needs, helping them strengthen the business as a whole.
One particular personnel investment every entrepreneur should consider is IT and cybersecurity expertise. Ransomware attacks rose by an estimated 92.7% in 2021, hitting organizations in all fields and industries. Cyber attacks can be extremely costly for companies, particularly ransomware attacks. Investing in someone who can build a robust cybersecurity system for your business could help protect you from these rising security threats.
Invest in Your Business’s Reach
When new entrepreneurs think about investing, things like property or stocks may come to mind. However, you need to remember to invest in your company’s growth. You can do this by investing in your reach — the audience connecting with your brand.
A helpful way to think of this is in terms of Wi-Fi. A single Wi-Fi router on its own can only reach so far. Eventually, the signal will grow weak and drop off. If you invest in more routers and hot spots, your signal can go much further. Investing in your business’s reach is all about finding new people and avenues to help you expand the audience your brand’s message is connecting with.
There are all kinds of ways to do this. You might invest in a couple of videographers or social media experts to build out your company’s social media pages or create YouTube ads. Similarly, you could invest in copywriters and micro-influencers to help spread the word about your brand online.
You could also invest in market research services. Whether you do this analysis internally or hire a third-party firm, thorough market research requires time and resources. It can be a worthwhile investment for discovering your target market’s interests, where they interact online, their awareness of your brand, and how you can potentially improve your relationship with them.
Consider what audience you are attracting now, what audience you would like to reach that you aren’t already and what investments could bridge that gap.
Additionally, consider the role technology plays in expanding your business’s reach. Investing in something like a customer relationship management platform could help your business deliver a better experience for your customers, improving the word-of-mouth marketing you generate. Technology can help you support a larger community of customers as you grow, as well.
Keep Your Investments Diverse
Finally, while choosing new investments for your company, remember to step back every now and then. Check-in with the investments you have planned. Are they heavily concentrated in one area or another? Are they spread out between various types of investments and assets?
Ideally, you want to make sure your business is growing evenly. You don’t want to invest in a vast new team of employees before you have the sales revenue to support them. So, analyze the assets you are currently investing in and consider what could help diversify your investments.
At this stage, it is also worth considering how your investments impact your company’s taxes. You may want to diversify your investments to include some that help lower or minimize your tax burden. There are many ways small businesses can do this, such as investing in retirement funds or equipment that qualifies for business expense tax write-offs.
Creating a Diverse Investment Plan
This is an excellent opportunity to build on the five to 10-year road map mentioned earlier. You might have many ideas for exciting investments for your company, but you don’t need to start diving into those investments all at once. In fact, the wisest course of action is to give each asset your full attention while planning and implementing it before moving on to another.
Considering what your five to 10-year goals are and the current state of your business, pinpoint which investments would be the most impactful over the next one to three years. Make sure you keep them varied, as mentioned above.
Maybe over year one, you invest in cybersecurity training for a few team members and a disaster recovery plan. Add those to your road map. Similarly, maybe in five years, you have invested in some new staff and are now ready to open a second office.
Each investment you add to the road map should build on progress in some area of your company, such as personnel or real estate. By outlining your goals over the next five to 10 years, you can get a clear overview of what investments you have in mind and how you’ll grow in the years to come. This allows you to plan well ahead and keep your assets diverse and relevant to your ultimate aspirations.
Making the Right Investment Moves
Choosing company investments can often feel like a game of chess — every move contributes to your business’s larger vision and strategy. Be tactical about your next investment. Consider the current state of your company and your team, where you want to go, and how you could improve.
With the right goals and strategy in mind, you can choose the perfect investments to build the business of your dreams, one wise investment at a time.