The Small Business Globalization PrimerMarch 31, 2023
As an entrepreneur, it’s easy to fall into the trap of believing that your business is your best investment. After all, you’ve poured countless hours, resources, and energy into building your company, and you’ve likely seen some success along the way. However, when it comes to making sound financial decisions, it’s important to consider all of your options, including whether or not your business is truly your best investment.
Pros of Investing in Your Business:
- Potential for High Returns: One of the biggest advantages of investing in your business is the potential for high returns. If your company is successful, you can reap significant financial rewards, from increased profits to a higher company valuation.
- Control: When you invest in your own business, you have complete control over how the money is used. You can use it to expand your operations, hire new employees, or invest in new products or services, without having to answer to outside investors.
- Passion: For many entrepreneurs, their business is more than just a way to make money. It’s a passion project that they’re deeply invested in, and they want to see it succeed no matter what.
Cons of Investing in Your Business:
- Risk: Investing in your own business is inherently risky. There’s no guarantee that your company will be successful, and if it fails, you could lose not only your investment but also your livelihood.
- Lack of Diversification: By investing solely in your business, you’re putting all of your eggs in one basket. This lack of diversification can be dangerous, as it leaves you vulnerable to market fluctuations and other unforeseen events.
- Limited Liquidity: When you invest in your own business, your money is tied up in the company. This can limit your ability to access your funds if you need them for personal expenses or other investments.
Examples of Investing in Your Business:
- Expansion: If your business is doing well and you want to take it to the next level, investing in expansion can be a smart move. This could mean opening a new location, investing in new equipment, or hiring additional staff.
- Marketing: Investing in marketing can help your business reach a wider audience and attract new customers. This could include advertising campaigns, social media marketing, or SEO strategies.
- Product Development: If you want to stay competitive in your industry, investing in product development can help you create new and innovative offerings that set your company apart. This could involve research and development, hiring additional staff, or investing in new technology.
Investing in your own business can be a smart move, but it’s important to weigh the pros and cons before making any decisions. While there’s potential for high returns and control over how the money is used, there’s also inherent risk, lack of diversification, and limited liquidity to consider. Ultimately, the best investment strategy will depend on your individual circumstances, risk tolerance, and financial goals.
Ron Wills, President & Founder, NABOE, is the transformation executive for NABOE and is a firm believer in the power of entrepreneurship to drive innovation, economic growth, and social change. Through NABOE and its many programs, he is committed to helping small business owners and entrepreneurs succeed by providing them with the tools, resources, and connections they need to thrive in today’s fast-paced and ever-changing world.
Want to learn more, or become a member? Set up a meeting to discuss the many opportunities available: https://ronwills.youcanbook.me