Pouring large amounts of money into your failing start-up will result in frustration unless you are willing to make major adjustments. In other words, purchasing non-essential equipment, products or services can wreak havoc on the financial culture of any business. But intelligent investing in the necessities of a small business can enhance its growth and development.
When money has a positive influence on a business, it expands and becomes more efficient in its daily operations. It grows in revenue and attracts more customers. Such a company also has a good grip on its financial budget because money is being spent on potentially profitable assets.
Bad business investing occurs when a company invests in bad opportunities or in products or services that exhaust its resources without the slightest potential for ROI. Although risk-taking in business is a must, it should be conducted with a win-win mentality.
If a business owner constantly pours money into a start-up and it keeps producing the same negative results, he or she should consider discontinuing pouring money into it and look for a better investment.
To Spend more money or Not to Spend more Money
Knowing when to invest in new products and services for your small business is the hallmark of success.
When to Invest
Large spending meets the needs of the company
The good investment yields a profit, whether it is long term or short term. For example, investing in another company’s trending stock, which has the potential to attract customer interest or draw a substantial revenue, is a worthwhile opportunity into which to pour money.
Your Resources are enough to maintain the investment
What’s the use in investing in a product or service which will exhaust most of your financial resources? Such activity isn’t a good idea. Why stretch the budget beyond its means to support an investment? Although the opportunity may be there for the taking, your resources are too insufficient to effectively maintain the investment.
Make sure that you have sufficient resources to cover all expenses dealing with the investment. If you don’t, either wait until you do or what until another opportunity comes along.
The biggest mistake many small start-ups make is to rush into business and hope that the money will come. However, a number of conditions must be in place to obtain financial resources. Good credit, valuable connections, and accurate documentation must be established to get monetary resources.
When not to Invest
Investing doesn’t really fulfill a need
Investing money in unnecessary equipment, products or services that you think will enhance the image of the company may not be a good idea. Many companies possess assets that make little impact as far as growth and development are a concern. As a result, the budget usually takes a huge blow.
A budget killer: What is it?
Do you see an incredible opportunity to make an investment that will improve the revenue of your small business? Often it is an opportunity that you just can’t convince yourself to ignore. Yet if you invest in the project or service, you will spend a high percentage of the budget without the slightest chance of recovering the finances on time, if the project fails.
Companies take such risk all the time, but these are companies whose competitiveness is usually short in the marketplace.
The timing is not right. The market is dwindling
Avoid making an investment in a product that is going out of demand. The brand may have reached its peak and is about to be replaced by a grown trend. When videos stores were king, people flocked to them to buy their favorite movies or videos.
However, as Netflix became increasingly popular, and when social media giants such as YouTube, Twitter, and Facebook became established, major brick-n-mortar video stores went out of business. To have invested in video stores at that time would have resulted in financial disaster.
The bottom line is that it is more profitable to spend money intelligently. Anxiousness and greed will most likely result in financial chaos for your business. Although some risk taking is necessary for success in both business and in life, destructive risk taking can lead to a failed organization and a ruined reputation when it comes to attracting customers.