As a small business owner, there is nothing better than positive cash flow. This means your company is moving in the right direction, and in position to achieve greater success in the future.
But here is a question that may be holding you down: what should you do with excess cash?
While some companies stockpile as much money as possible in the bank, realizing that this will come in handy at some point, others look to make a “sure” capital investment that will boost revenue and profit.
Tip: There is nothing wrong with saving and investing. It should be your goal to strike a balance.
Top Capital Investments
When it comes to capital investments, there is no shortage of strategies. Since every decision you make will impact your company, this is not a time to take a “wild guess.” Instead, every investment you make should be calculated. Below are five of the “surest” capital investments your small business can make:
Are you in the manufacturing space? Could more and/or better equipment help take your company to the next level? If so, it may be time to invest in upgraded equipment.
Not only does this put you in position to produce more product, but it may improve the overall quality. Furthermore, and just as important, is the fact that equipment is an asset in its own right.
This is not an appropriate option for every small business, but if manufacturing is part of what you do, it is an idea to consider. When it comes to safe investments, this is truly one of the best.
There is a big difference between hiring just to hire and hiring employees who will bring more success to your business.
When you invest in people you are investing in one of the greatest assets available. Your goal should be simple: hire the right people, at the right time, with the idea that your investment will yield solid growth.
As long as you have the capital to invest in people, as long as you have a plan for putting new employees to work, you cannot go wrong with this investment. Good employees may be hard to come by, but if you find who you are looking for it can be a definite gamechanger.
With training and employee development spending on the rise, it is easy to see that more companies have come to understand the importance of this investment. Even so, some continue to lag behind, not realizing that an employee without training will never reach his or her peak.
Consider this statistic shared by Go2HR:
“A recent survey indicates that 40 percent of employees who receive poor job training leave their positions within the first year. They cite the lack of skills training and development as the principal reason for moving on.”
You could invest in the best employees in your industry (see #2 above), but if you don’t properly train your workforce it may be all for nothing.
Training is one of the best capital investments your small business can make, but only if you have a solid strategy in place. This is not something you do with one employee and skip with another. It should be part of your corporate culture.
Tip: New hires are not the only ones who require training. Continued training and education can help your current workforce improve their on the job performance.
Go back in time 40 years or so, and this was not something most business owners were thinking about. Companies were investing in equipment, people, and training, but there was not much technology to consider.
It is now 2015, and almost every company, regardless of size or industry, can benefit from investing in technology. This can mean a few different things:
- Implement new technology
- Improve existing technology
- Upgrade technology
For example, the benefits of a faster, safer website far outweigh any potential drawbacks. As long as you will use the technology, as long as it will impact your business, it is one of the best ways to invest capital.
5. Sales and Marketing
What is the lifeblood of every business? If you answered “sales and marketing,” you are on the right track. Think about that for a second: if you don’t market your products and/or services, if you don’t make sales, your company will eventually stall out.
For this reason, it makes sense to invest in your sales and marketing strategy. This can include but is not limited to:
- Hiring more sales and marketing professionals
- Investing in sales and marketing software (and other technology)
- Spending more money on your marketing strategy, such as content creation or social media marketing
It may not be the only way to spend your money, but sales and marketing can definitely generate a high return on investment. Once you create demand, you can then turn it into revenue that directly impacts your organization.
No two companies are the same, meaning that your approach to capital investments may be unique.
If you have struggled to invest wisely, you can make changes for the better in the future. These five capital investments are among the surest your small business can make. Knowing this will allow you to move forward with more confidence.
Author: Meredith Wood is the Editor-in-Chief at Fundera, an online marketplace for small business loans that matches business owners with the best funding providers for their business. Prior to Fundera, Meredith was the CCO at Funding Gates. Meredith is a resident Finance Advisor on American Express OPEN Forum and an avid business writer. Her advice consistently appears on such sites as Yahoo!, Fox Business, Amex OPEN, AllBusiness, and many more.