Facebook advertising is all the rage in your favorite Facebook group. The Instagram celebrity businesswoman you follow recently announced the purchase of new video equipment for her company. And your industry BFF just placed a large inventory order to expand their product range.
So, is it time to invest in new recording equipment, rethink ad material, or place an order for extra inventory? Sorry to be such a downer, but no. At least, not without a strategy in place.
Whether investing in your company is something you’ve always wanted to do or something you’re apprehensive about. Doing your homework ahead of time will help you ensure you’re making the best option for your company.
Understand Your Investing Needs
Before you decide to put money into company growth and prospects, you must first grasp the fundamentals of your company’s finances. It’s very beneficial to be aware of how investing and a high-level prognosis for the coming year will work for you. Having a basic understanding of your working capital is essential.
This may feel like you’re invading your accountant’s domain, but the reality is that your accountant isn’t your CFO. While your accountant can be a valued adviser and even a close confidant, they aren’t your CFO. It’s basically up to you to make the best economic choices for your company.
Evaluate Your Revenue
Profit First is one of the most approachable concepts for managing your business’ finances and determining where that money will come from. It’s a straightforward approach practiced by most enterprises.
It divides the whole revenue of your company into four categories:
- Compensation for the owner
- Expenses of Operations
The amount of revenue allocated to each category is determined by your industry and the size of your company, and experts provide some simple calculations. The sum you put into each area is up to you and will be determined by the realities of your company.
You’ll be able to see a clear picture of where your money is going at a high level and where you could find money to invest if it’s good for you, regardless of how much you make or how you allocate the percentages.
Analyze Yearly Forecast
Perhaps your company is new, growing quickly, or subject to seasonal fluctuations. In any of these scenarios, a monthly snapshot of your business may not provide you with the data you need to make informed decisions about your expenditures.
This is when a yearly prediction comes in handy. It can also assist you in balancing your costs throughout the year. It’s great if you want to invest in a website makeover during the off-season, as far as you do so in the framework of your entire year—and don’t end up in the red at the end of it.
There is no clear answer as to whether the ideal moment is to invest in your business or what the optimal investment is for your particular company. It will always be determined by your company’s financials, your budget, and your objectives.