As your small business starts to grow, you may get to the point that you start thinking about investing some of those hard-earned funds. Actively considering how to manage your wealth as your business grows ensures you get to reap the rewards of your hard work for years into the future.
While this all makes sense, many small business owners haven’t been taught how to manage their wealth, and it’s not something we traditionally get taught at school or college. Knowing how to protect your current assets and grow them is an essential part of a successful business. Here are five tips to get you started.
Have a financial plan
Knowing how you want your business to grow relies on having a plan to increase your income and how to manage if that income changes for any reason.
Keeping a six-month buffer in a business savings account should form part of your financial plan. As we all discovered through the COVID-19 pandemic, everything can change in a relatively short amount of time. Having enough money set aside to continue running your business even if profits do fall will help to stay optimistic as you adjust your plan to meet those new challenges.
Maintain a positive cash flow
Small businesses often rely on a steady flow of cash, sometimes in the forms of lots of small payments, to keep their heads above water. You’ll also be paying a significant number of bills for goods and services yourself. The key is to maintain a positive cash flow. You want to make sure that there’s always more money coming in than going out. Research shows that out of the 30.2 million small businesses in the United States, only 40% make a profit while 30% break even and 30% lose money.
As your wealth starts to grow, it can feel tempting to splash out on some major purchases. Remember that this only makes financial sense if you’re consistently maintaining a positive cash flow. Never spend money you don’t have, especially on unnecessary purchases.
If you’re struggling with making saving money a consistent part of your routine, then using a money-saving habit tracker is a great way to take control and make setting aside money for investments, your retirement fund, or for that major purchase as easy as possible.
Consider adding crypto to your share portfolio
If you’ve already started investing some money into mutual funds or exchange trading funds (ETFs), then you might be on the lookout for some other options like cryptocurrency. Many small business owners are attracted to digital coins as either an alternative to traditional stocks or a compliment. As upgrades like Ethereum 2.0 are due to be released, many investors are monitoring how this will affect the market, and you may decide now is a good time to invest.
If you haven’t started your investment journey yet, then speaking to a financial advisor before you take the plunge is going to be money well spent. They can advise you on your funds between bonds and stocks, what tax breaks you can take advantage of, and more.
Make monitoring your investments as easy as possible
You don’t want to spend hours chasing down individual investments, so it’s essential to get the balance right between making intelligent investments and making sure they don’t take up too much of your time. A financial advisor will often manage your portfolio for you and give you a summary when requested.
Using a crypto exchange to buy, sell, or trade-in any cryptocurrency or altcoin is also a safe and secure way to manage your digital assets. You’ll also want to set up a hardware wallet that’s compatible with your own needs. If you’re serious about trading digital coins, then using a crypto trading bot is a great time-saving solution for trading and managing your portfolio.
Keep saving for retirement
Whatever other investment or wealth management tactics you’re using, don’t forget to maintain regular payments into your retirement savings account. Whether you’re using a traditional IRA, a 401(k) or another type of retirement plan, this is one way to manage your wealth for the future that you don’t want to miss out on.