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Insert Money HERE: Where Small Businesses Should Be Investing

In What You Need To Know About Small Business on August 9, 2017 at 8:16 am

 

Small businesses, especially in their fledgling stage face a constant battle against capital loss. A conscientious entrepreneur will do their best to cut costs by reducing their overheads, but when you’re just starting out it can be difficult to know where are the areas in which you need to cut back and where are the areas in which you should invest freely, safe in the knowledge that they’ll yield a substantial return on your investment. This article will investigate the areas in which small businesses should divert their spending and the kind of results you can expect to yield.

Fiscal multipliers- Make spending your friend

Fiscal multipliers tend to come up when discussing government spending, but it’s a principle that works well when applied to small business spending, too. A fiscal multiplier is essentially the return that you can expect to make on your investment. Let’s say you invest $1,000 in a new piece of equipment that generates $2,000 of profit in a year, the fiscal multiplier for that piece of equipment is 100%. Will your every purchase yield a 100% return on your investment? Of course not. But here are some areas of investment from which you can expect to make healthy returns.

Capital investments

When you’ve just started out, you’ve probably invested heavily in new equipment, technology and software to support your operations, but what happens when something new comes along that could increase your productivity? Is it worth replacing the shiny new thing you’ve just bought with the shinier, newer thing? If it increases your productivity, then absolutely! This is the key to small business growth and why you should be sure your business has a healthy cash flow so that you can take these opportunities. Discount bulk buying of inventory and moving to better located premises are also always prudent investments.

Marketing

However great your product and however stellar the services you offer , it amounts to nothing if people don’t know who you are. Consulting with an internet marketing service is absolutely essential in order to maximize the return that you see from investments in marketing strategy. Many startups headed by internet-savvy entrepreneurs often believe that they can save money by doing all of their own marketing, but this can be highly inefficient. It can distract them from the day-to-day operations of their business and reduce overall productivity. Since marketing costs tend to yield an average return:investment ratio of 5:1 then it’s safe to say every penny spent on content creation, PPC advertizing and outside marketing fees is a good investment.

Personnel and development

No entrepreneurs is an island and success without a talented hard working team can be very hard to achieve. Since your employees are the people who will ensure the growth and prosperity of your business it’s important to make sure that they’re well looked after in order to retain their talents and ensure that they’re able to do their job as effectively as possible. This means not only paying them competitively but investing time and capital in training and developing them. If they feel they’re stagnating they’ll be only too happy to cross the road to work for your competitors.

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