New Investments And Expansion

Expanding and new ventures always can be a good thing, right? Not always. There are a lot of pro’s to joining into new ventures, but there can be setbacks in the future, if the right steps are not taken when expanding. Numerous businesses fail within the first year of starting; while it may be the cause of lack of experience or along those lines, I believe it has more to do with a lack of understanding and planning.

Whether it is your first business or your tenth, you have to analyze if your situation permits you to start a new business or get involved with an existing venture. While many people have the availability of capital, they lack to plan for setting aside some time and more resources than just money when getting involved with a new business. If a new business owner doesn’t spend enough time with a business, more than likely a business can fail. With only 24 hours in one day, there is only so much time that can be allotted to certain tasks. The time in one day cannot exceed 24 hours, whether you are involved with 20, 200, or 2000 businesses. Making the proper judgment to see if you will have the time it needs to look after your new investments is crucial in the long run for setting up a successful business that will give you a good return.

In addition to analyzing if you have enough time to look after a new involvement, you have to think about your current situation. Are there any investments you have made that are heading south? Are there any that might need more attention in the near future? If you try to expand when other ventures are not doing so hot, you might end up losing all of your investments because the new one is not getting enough attention and the old one is dragging you down. Proper planning in terms of running positive return investments is also necessary before expanding into bigger and better ventures.

I often get new proposals, asking if I want to join a venture, but I unfortunately have to turn down many offers because I don’t want to over expand myself and cause myself to fail at everything, trying to grow larger overnight. A slow, steady, growth can usually last longer when compared to a fast, overnight, growth. When something grows over night it can usually fail just as fast.

To read a post on Overnight Growth Click Here

Rock Bottom Funds

Many small businesses run into a problem in particular with their cash on hand. If you think about what causes most businesses to fail, it's the lack of capital reserve. No capital leads to missing out on loan payments, leading to the failure of a business, missing out on new opportunities, and more. On the other hand, even at a personal level, there are numerous advantages to having cash reserve, which could help you when times are bad, but even more-so when deals are present.

The business funds...

As far as corporate funds go for your company, you should have a reserve on hand so you can manage if something unexpected comes up. Not having to rely on a bank or other third party cash funds can really put you ahead of any short term crisis. Many businesses dry out their funds by cutting high salary checks to owners, spending everything on remodeling the business or other investments for the business. While it is good to remodel and pay yourself well, it's not good to leave the bank account low. You might think you have an extra $500,000-for example- laying in a bank account, but if you really think about it, it could probably be spent quickly. Imagine if the opportunity for you to buyout your leading competitor came along. There is your company that has the opportunity and there is another. Lets look at the good scenario first, when your company has funds available, you can think fast and either pursue to buyout your competitor before anyone else makes an offer, without having to rely on loans passing. On the other hand, you might not have the funds available, in which case you apply for a loan, while another competitor takes the opportunity and buys out the business. Now you face the problem that the 1st and 2nd biggest competitors combined and now are bigger than you, generating not only more sales, but are able to provide to your customers more than you can. This could lead to lost opportunities down the road, just because you didn't have any cash available.

The personal funds...

Ever hear the phrase, "You are rich, what are you worried about?" I hear it all the time. It's a common misconception when people think rich people don't have to care about where they use their funds. Buying fancy cars, fancy houses, gadgets and more is all great, but that shouldn't be where you spend most of your wealth.

Lets take the current economy for example. Say the opportunity for you to buy a piece of land that regularly would go for $100,000 came along for purchase at $50,000 but you spent all your money on that new car. Now what you have set yourself up for blocked capital. While you might be able to sell your car for the depreciated value from $100,000 to $90,000, you are taking not only a $10,000 loss on your car, but giving someone else a chance for you to come take that land away from you while you find the funds to invest.

There are deals that can be found everyday in this economy, but it is up to you to decide if you want to keep a cash reserve or just spend your wealth. Know this, if a reserve is kept, you are able to decide if you want to buy into a good deal or not, but if you have nothing, you are forced to say "Sorry, I don't have the money!" Instead of running into this type of situation, think of a theory like this: Earn a dollar, spend a penny. I'm not saying you should adopt to that theory, but something like that might help you save better. Being cheap can be okay! Most rich people are rich because they are cheap.

--Not only from an investment standpoint is having a backup good, but even in everyday life. You never know when you might need an extra $20,000, so it's always good to keep something that can save you from going into tons of debt or even potentially losing your shirt!

Should I Reinvest in My Business?

Established businesses always wonder if they should reinvest in their business. My answer to this would be: If you want to keep growing you definitely should. Why reinvest? What do business owners gain out of reinvesting? How should you reinvest? How much should you reinvest?

Why Reinvest?
Reinvesting in a company, in this case, your business, always helps on many levels. It always goes to say, when you spend a little you get a little. So when you reinvest money into your business, you are should be seeing a better overall performance of the business. Say your company is not doing so well because of its location. Reinvest from the profits of the business are relocate your office/store. Maybe you need to purchase new equipment to better serve your customers or speed up processes. This all goes with reinvesting because ultimately you will uplift the overall performance.

What Do I Gain Out Of Reinvesting?
Better bottom lines, quite possibly. As stated previously, relocating your current business would give you better visibility, thus bringing in more potential customers. You might just see an increase in sales by relocation and no additional marketing than what you were doing before. I would say a 10% increase in rent or mortgage for a 50% increase in sales is quite favorable, respective that your rent is not out of the roof over the bottom line. After reinvesting business owners are bound to gain something in return, be it small or big you should see change.

How Should I Reinvest in My Business?
Reinvesting does not only mean putting more money back into the business. It can also mean investing more time and energy back into the business. If you work X amount of hours and find the time to put in a few extra hours to work on another innovative idea for your business. The overall outcome will be a few extra hours multiplied by how many days you work and something extraordinary might come out of that. Reinvesting time can help you come up with better strategies to operate your business, better marketing ideas, better ideas to help service your clientele, or just help you come out with better or new products. You do not even have to reinvest time while working. Set aside some time while you are at home, think over some things on how you can grow your business. Draw up some possible outcomes of changes.

How Much Should I Reinvest Into My Business?
You can never put back in a perfect amount. There is no simple formula to how much time, energy, money, etc. you can put back in. You have to look at how your business is performing and see what you think you should put back in. If you want to market your business better, you can think of putting aside a certain percentage of money from profits to advertise more. You may also want to come up with some plans for your business, see how it grows and come up with a full growth plan. Analysis of your current business situation should help you better understand how much to put back.