Finances are your biggest problem when you’re starting your own business. Cash flow problems is one of the biggest killers of new businesses because people struggle to stay afloat until they start making sales. Managing your spending is obviously important here because you don’t want to burn through all of your cash in the first couple of months. Finding somebody to invest in your company and give you the startup capital that you need to survive is the next step, but even then, you’re still at risk. If you’re going to keep your business afloat long enough to start bringing in revenue and break even, you need to find another way to fund yourself.
Investing is a great way to do that, as long as you get it right. There are a lot of risks involved with investing as you probably already know and when your business is at stake, you need to proceed with caution. But if you invest successfully, you can get the capital that you need to keep your business running until you start making a profit. Here are some great tips to help you get started with small business investing.
Consider Your Business Goals
The first thing to think about when you’re investing is your business goals. Have a look at your accounts, your business plan and any upcoming projects. You shouldn’t think of investing as a way to replace income from business activities, instead, you should see it as a way to supplement the money you’re already bringing in so you’ve got a reserve buffer if things go wrong. That means you should only invest any surplus money that you’re not spending on anything else. Look at your marketing efforts and put more money into those if needs be, consider what you need for your overheads and set some money aside for new product launches etc. Only once you’ve budgeted for everything else should you start looking at investing. If you start dipping into money that you need for running the business, you’ll be making compromises and you won’t be able to push the company forward. If you lose money that, for example, was set aside for a new marketing campaign and you lose it, you’ve got less money and you won’t be able to launch that new campaign either.
Property Investment
If you’ve got a large lump sum that is separate from your business finances, you should think about investing it in a property that you can let. This is going to give you a regular monthly income that you can dip into when you need money for the business and the value of the property is going to go up so it’s a safe investment. Look for a good HDB resale flat in a desirable area and you shouldn’t have any trouble renting the place out. Just make sure that you go for a place that is in relatively good condition because you don’t have the time to be doing regular maintenance when you’ve got a business to run.
Penny Stocks
A penny stock is a cheap stock that costs under a dollar so it’s a great place to start if you don’t want to risk large amounts of money. It’s a very volatile market so you need to manage your expectations going in. However, it’s not the end of the world if your investment does go bad because you’re only putting in a very small amount. Investing is a skill like any other and you need to practice it. You don’t want to be learning with massive, risky investments so penny stocks are a great way to learn the ropes and improve your investment skills before you move onto bigger things.
Mutual Funds
Investing in a single stock is quite risky because you’re counting on the success of that one business. If it goes down, you’re losing a lot of money. But you can manage that risk if you invest in a mutual fund. Mutual funds combine hundreds of different stocks into one investment. That means, if some of those stocks dip, your overall investment is still safe. This is the best option for new investors that aren’t that confident yet because you might end up making bad decisions. The returns on mutual fund investments aren’t going to be massive compared with standard stock investing but the chances of losing your money are incredibly low. When your business is at stake, it’s better to go for low risk investments that give you small returns over time.
Diversify Investments
Even if you’re putting your money in safe investments, you’ve still got to be careful because there is no such thing as a completely risk free investment. There’s always the chance that your investment is going to go bad so you need to take steps to protect yourself. The easiest way to do that is to diversify your investment portfolio and spread your money out over a lot of different investments. That way, if some of them go bad, your other gains will offset those losses. Put the majority of your cash into safer investments like property and mutual funds and then you can gamble the smaller amounts on the high yield investments.
Be Patient
Not being patient is one of the biggest mistakes that people make when they’re investing. If you rush into things, you’ll make bad decisions and ultimately lose your money. The reason that business owners do this is that they’re too reliant on the money from investments to run the business. You should be funding the business properly without your investments and the returns that you get should be used as surplus or a cash buffer during difficult times. Don’t get impatient and start rushing into things. Just accept the fact that it’s going to take time to earn money from your investments and let them tick over in the background while you focus on running your business.
Investing is a great way to build yourself a safety net that can protect your business but you need to be sensible about it.