Running your own small business isn’t easy. Your capital might be low and you’re wondering how to pull together enough resources to keep afloat, let alone figure out how to grow your business. Although it would be ideal, you really can’t run a business on your skill and sheer determination alone. Good news–even small businesses can adopt an investment strategy that helps grow capital if done right. If your business finances are feeling a little thin, or you just want to plan ahead and strategize for growth, it might be time to consider investing. Here are 3 investment strategies financial planners employ that can be the “make or break” for small businesses:
Align Your Investments with Your Business Goals
Investing should be a way to enhance your small business income, not supplement it. This is key. Before you start engaging in any kind of market speculation, you need to take a hard look at your business goals, business plan, debt load and any other kind of financing you’re carrying or likely to carry. Don’t take money needed for another part of your business in order to multiply your capital holdings. This just isn’t smart. If there is a market downturn, for example, you’ve just lost money that you need for other business financial obligations, and it may be difficult to recover from this, especially if cash flow is weak.
Keep your business’s best interests in mind when investing. Use any surplus profits to make down payments on investments, and always remember: investing should not be treated like gambling. When it comes to your business, it’s best to minimize your financial risk.
Time is on Your Side–Keep it There
Investing is not get rich quick scheme, though you might get that idea from the way that many amateur investors talk. Take a page out of Warren Buffett’s playbook: business investing is a long-term game where the best returns come to those who are willing to wait–for years, if necessary. Even when things look bad in the market at the moment, it’s not always a sign that you should pull your money. After a bear market, the resulting returns tend to be much higher, but only for those who wait for the right time to sell. Trying to pull your investments out when the market is bad and put them back in when it’s good will cause you to miss some of the best returns. If you’ve made the right solid investments in companies which will weather market fluctuations, you will come out ahead of the pack.
Use Tax Savings as an Investment Strategy
Unfortunately, when you trade and sell within a market setting, there are often hidden fees and taxes for which you need to plan. These charges can amount to as much as 30 percent of your profits if you don’t get them under control from the beginning, you’ll find yourself on the losing end of the investing pool. You need to learn how to minimize your taxes and use those savings as investment capital for your business. First, before you make any investments, talk to financial advisors who understand taxes. At Financial Gravity, our tax and financial advisors will conduct an initial meeting to determine your particular situation. Then they’ll work with you to put together a Tax Blueprint. This is your business plan as it relates to how you’ll pay taxes, and it includes taxes paid on investments. This is where instead of having money taken away from you at the end of the year, you can plan ahead to minimize your taxes and use that plan to increase your investment capital. This tax savings and investment strategy will likely identify and free up sources of investment capital you didn’t know existed because they were going to taxes you don’t need to pay.
Many small businesses pay way too much in taxes when they could be using that lost income for investment. If you would like to know more, download our free eBook: Bust the 10 Tax Myths Sabotaging Your Small Business Success.
Investment is not something that should be taken lightly. You’re putting a lot on the line when you go into the market for your small business, and a series of wrong moves can get you in so deep, it might take years to recover. However, if you enter the market carefully and cover all your bases by enlisting good tax and investment advice, you and your small business will come out victorious in the long run.
Find out more about how you can bring on financial planners who will truly assist you in employing the best investment strategies for your small business. Speak with a Financial Gravity team member: Let’s Talk!!!