Business Investments

Why should you invest your business profits?

 

If your business has had a very profitable year, you may be debating how to best utilise your profits. After distributing salaries to employees and dividends to trustees, there are many options to divide the remaining funds. One option is to increase salaries and pay out more in dividends. However, there is a certain point where it this is no longer tax-efficient.

 

Another option is to invest your profits. Investing your profits is a form of diversifying your business income, because it allows you to derive funds from multiple sources. This can make your business more resilient to changes in the market, increasing your chance of business success. Experts suggest that you should use the same investing wisdom for business as you do for your personal finances.

Investing profits

One good reason to invest your profits is to generate more funding for your business moving forward. Having available funds may allow you to take on new projects, buy new merchandise and hire new talent.

When planning your investment strategy, you are looking to maximize your potential earnings. Be sure to examine these four factors before investing:

 

  1. Risk – likelihood that you can lose your investment
  2. Liquidity – how easily you can access the cash you invested
  3. Maturity – duration of your investment
  4. Yield – what return on investment can be expected

 

These factors will determine your rate of return. Your specific business model should impact your investing strategy. If you have a lot of capital to spare, you can choose to invest less conservatively. Develop an investment strategy with your business partners and trustees to match your business model and needs.

 

Can a business invest in shares?

 

Yes, most businesses can invest in stock shares. As a sole trader, you and your business are legally regarded as one entity. You as an individual are free to invest as you please.

 

As a limited company, you are generally allowed to buy shares. Before investing, check your specific operating agreement. According to your agreement, either all owners are authorised to make transactions or designated individuals will be authorised. Check the SIC codes to make sure your investment activities fall within the legal limits.

From investing in stocks, you will make money from dividends paid on the shares, and capital appreciation on the share price.

 

If you do not have time to research individual investments or money to pay a broker, consider purchasing mutual funds. These portfolios come already diversified, so the risk is much lower for the investor.

 

Can a business buy bonds?

 

In addition to the shares in your portfolio, it can be smart to invest in bonds. Regarded as lower risk and lower reward to stock shares, the average bond returns 6% a year on your investment. Bonds can be issued by corporations, the UK government or foreign governments. A big benefit of bonds is that you receive back your capital investment at the end of your term. The relationship between interest and bond prices is inverse; as interest rates increase, bond prices fall. There are plenty of different types of bonds to compare, so evaluate the prices and interest rates before purchasing.

 

High yield bonds, otherwise known as junk bonds are issued by institutions with poor credit ratings. While the ROI is higher than standard bonds, the risk of losing your investment is higher.

 

What about premium bonds? Premium bonds are bonds trading above their par value (otherwise known as face value). If the average interest on bonds is 5% and a particular bond has 6% interest, investors will bid up the bond until the interest has fallen. Purchasing a premium bond can be a smart investment if you have good timing.

 

Can a business invest in property?

 

There are many reasons a business would want to invest in property, either by leasing or buying. Acquiring a new space could help your business expand and gain new customer base. The four main types of business property are offices, retail spaces, industrial properties and leisure properties (including restaurants, pubs, gyms and more).

 

When purchasing a new location, there are many different factors to acknowledge. Your preferences for a location should be driven by market research and your specific business. For example, a pub may flourish in an area that has too few pubs for the population, or in a district with a vibrant nightlife.

 

When you are purchasing or leasing a location, consider these factors:

  • Transport – How will your customers or employees arrive at your location? Is there a close bus or tube stop?
  • Parking – If you are in a suburban area, does your location have adequate access to parking? Can you provide parking vouchers to customers and employees?
  • Deliveries – If you are selling merchandise or food, will it be challenging to receive a delivery? Is there a place for the delivery-person to park the truck and unload?
  • Congestion – Does your business require foot traffic, or will customers travel to visit? Gift shops, restaurants and pubs often earn customers most effectively in busy areas.
  • Proximity to other businesses. Certain business thrive when they are located near to other businesses. Choose your location strategically!

 

Are you looking for the funds to grow your business? At Mycashline, we provide fast funding to businesses to get the capital they need. Our quick approval process will get you funds fast, so you can focus on generating profit.

Q4 Business Planning

 

We are already a month into Q4, and many business owners and managers are working hard to accomplish their business goals. The end of the year, or Q4 as it’s known in the business world is all about wrapping up the fiscal year, and preparing for Q1 which begins in January in 2019. Many businesses professs that Q4 is often the most profitable time of the year: end of year and Christmas sales go into effect and purchasing agents are encouraged to make extra transactions.

 

With all of this in mind, every business needs a great strategy to set them up for achieving their quarterly goals. With any strategy setting session, the best place to start is to clarify what you want to achieve and what steps you need to take to make it happen.

 

Set your SMART goals for Q4

Good business goals are SMART. 


Specific: Creating specific, tangible goals is much more effective than creating vague goals. You are more likely to sell clothing if you set out to sell 2,000 t-shirts as opposed to setting the abstract goal to sell ‘more’. Specificity helps you aim your efforts towards a tangible end.

 

Measurable: Make your goal quantifiable, so you can know if you have achieved them. Goals such as ‘do better business’ will not help you because you are unable to tell if you succeeded or failed. By setting a quantifiable goal, you are able to reflect on what you did right to achieve your vision or what you did wrong that prevented you from realizing your goal. Use the insight you gain to guide future decision making.

 

Agreed upon: Are you the owner of your company, or do you have a partner? Do you have employees working under you? Business goals should be decided with your peers and communicated clearly to your employees. This helps you make sure that everyone is filled in on critical details and that the goals are achievable.

 

Realistic: Creating realistic goals will help you remain on track and not get discouraged. Lofty goals could make you feel inadequate, and too-small goals will not encourage you to work as hard as you can.


Timely: Make goals that are achieved in time, such as make x amount of sales by November. Having dates will help you stay on track and not push off work into the future.

 

Looking back on the year

Q4 is a great time to reflect on your fiscal year. Take time to go through the numbers of your business and evaluate what strategies worked and what needs to be adjusted.

 

Evaluate your marketing strategy. If your marketing strategy is content based, look through your page specs to see which articles garnered a lot of attention. Are there any noticeable trends? Perhaps certain types of content are ignored by browsers, others get a lot of attention and some are great at converting. You should not feel compelled to throw away the content that is less effective, but this content analysis should inform what content you put out in the future.

 

As Q4 is all about getting ready for Q1, consider creating a content calendar. This calendar will motivate you to create consistently, and it will also help you climb the ranks in search engines. Additionally, creating more content will give you more data points about what content converts. Consistent creating will allow you to hone your craft, writing more and more effective content going forward.  

 

Talk to your employees

Plan an in-depth conversation with all of your employees. The purpose of this meeting should be twofold: it is a chance to give feedback, and ask for suggestions. Give your employees in-depth feedback about the areas in which they are excelling and areas in which there is room for improvement. Try not to be shy because this feedback is critical to helping your employees evolve. Dare even to discuss challenging topics, such as office dynamics. If you perceive one of your employees to be combative to his peers, discuss it. Is there tension between two employees, or does your employee need to address his tone with colleagues?

 

This is also a rare opportunity to ask for feedback and suggestions from your staff. Most of the time, our employees work towards our vision and do not express their opinions openly. While this support makes offices work efficiently, it may also prevent creativity from emerging. Ask your employees about how things are going for them and ideas they have for future company growth. Maybe your employee has an amazing idea you never would have considered!

 

Consider planning a team-building activity. Businesses thrive when employees feel connected to each other and the business mission. Help foster these connections by taking employees to an escape room, to do a game-day in the park or simply treat them to a nice meal.

 

Plan holiday bonuses

Modern workplaces are often very stressful. People sometimes feel the need to compete with their colleagues, answer email on weekends and occasionally take their work home with them to stay on track.

 

Holiday bonuses help maintain morale. Your bonuses can come in the form of gifts, holiday time or cash. There is no one-size-fits-all plan for holiday bonuses, so feel free to get creative. Planning these bonuses now will prevent you from doing it last minute and making mistakes.

 

Practical to-dos

These practical to-dos will help your business run smoothly into the new year. Clarify your business vision by keeping everything organised!

 

  • Update contact lists. Make sure all of your potential customers are hearing from you! Take people off your list who don’t want to be there.
  • Tally your inventory. Do you have enough of everything to continue into Q1?
  • Contact your suppliers. Are they on track for 2019? Have prices changed?
  • Reevaluate your pricing. Are you pricing yourself out of the market, or could you be charging more for goods and services? https://uk.camelcamelcamel.com/
  • Organise an annual audit.
  • Check communication software to make sure your emails are sending as intended.

Thinking ahead

Wrapping up the year means lining up opportunities for the next year. Accordingly, make a goal to call your top 30 business opportunities and arrange meetings. You may not be able to do business with these leads in 2018, but you will be setting yourself up nicely for a stream of work in 2019.

 

Does your business have multiple facets? Consider what was working for you best in 2018. Rather than just fixing your weak spots, focus on strengthening your most profitable ventures. How can you grow in 2019?