Should You Put More Money Into Your Business?

Posted by on Nov 4, 2015 in Blog

Should You Put More Money Into Your Business?

Regardless of how well your business may be performing at the moment, one of the most difficult decisions you will ever face as a business owner is choosing whether or not to invest more of your money into your business. Sometimes, an injection of cash is just what is needed to help you weather a temporary downturn in your business or to help you grow your business by making it possible to expand.

Other times, there may be fundamental issues with your business strategy and prospects that turn your once popular, growing business into a literal money pit that will never break even. In these situations, it can be for the best to cut your losses and start a new venture where you can try a different idea or business model rather than investing any more of your money.

The real challenge is learning how to be unbiased as you examine the performance and structure of your existing business so that you can make an informed, sound decision. Use the following tips to help you figure out whether or not an infusion of cash or other resources will give you the best return on your investment.

Can You Improve Your Business Without Additional Cash?

If your business is struggling, and you’re running low on operating funds, one of the first things that you should do before you consider investing more money into it is to look for ways to improve your business processes that don’t require additional money.

Two key areas that you can focus on to improve your processes that don’t require a significant amount of new cash are social media and staff motivation.

While traditional forms of advertising to get the word out about your business are expensive, look for ways to harness the power of networking and social media to get the news out about new products, services and promotions. Most social media platforms are free or low cost to use and provide you the means to connect with current and prospective clients and build relationships that can lead to additional sales.

Ensuring that your staff is motivated and qualified to assist you and your customers is also a key factor in developing a successful business. While it’s tempting to consider offering raises and cash bonuses for improved performance, it’s also possible to attract new talent, and keep the great associates that you already have working for you, by offering incentives in place of extra cash. Perks such as flexible scheduling, reserved parking, public recognition, and even additional vacation time, are great ways to attract and retain an energetic and motivated workforce.

Have a Clear Spending Plan for Additional Funds and Use Testing to Ensure It Will Earn a Return

Do you have a specific need that can be funded by an additional investment of money, or are your planned expenditures simply a want? You can tell you have a genuine need for the funds if you plan to spend it on something that will lead to the streamlining or improvement of your business processes.

Spending money to buy new equipment, software, materials or even hire additional staff is only a good idea when doing so will produce a benefit that helps you to expand your service level.

Have a clear goal in mind when investing additional funds into your business, and look for ways to test out your ideas on a trial basis, with a smaller infusion of cash, before committing larger sums to your business. This goal will help to prevent you from investing in a lost cause and throwing good money after bad.

If the prospect of your cash infusion doesn’t present an obvious return on your investment within a reasonable amount of time, you are likely better off skipping it or cutting out an unprofitable segment of your business. This can help you to narrow your focus and improve your competitiveness while also helping you to free up funds that you can then apply to the more profitable, core areas of your business.

Deciding whether or not to invest additional cash into your business is a tough call.  Thankfully, these few simple guidelines can help you make the best choice for your situation. Get in touch today to learn more about how to strategically invest in your business so that it can grow and thrive.