When starting a business, choosing where to invest your money is an extremely important decision. Seeing as only half of all businesses make it past the five-year mark, it’s clear that you need to be smart about where you put your money.
There are five key areas to be investing money in as a business owner: marketing, operations, employees, insurance and finance. Here are the most important things to be spending on in each area.
Investing in marketing is essential for all businesses, but especially for new ones. In America, the average company spends 7.9% of its yearly revenue on marketing, but as a new business, your spending should really be much higher. Strategically investing in marketing has a proven return on investment—it can help you build brand awareness and attract and retain customers.
It’s also crucial to be spending on market research. Many business owners make the mistake of skipping market research since it can be costly upfront, but correctly understanding market demand is one of the key determining factors to whether a business is successful. Performing market research also helps you identify your target market, which, in turn, can help you more effectively brand your company to resonate with consumers.
Spending on the operations of your business is crucial for long-term success. Although it may not be as instantly gratifying as spending on marketing, investing in operations activities is necessary for both product and service-based businesses.
If you are product-based, spending on the proper tools & technology for your business is an essential long-term investment. With the proper tools, you can increase your productivity, reduce the chance of errors, and give yourself an edge over competitors.
If you are a service-based business, investing in quality customer service will pay off in the long run. Having top-of-the-line customer service can be the deciding factor for a customer choosing your company over a competitor. It can also provide insight into the customer experience and help you understand your target market better.
The people who work for your company are just as important as the company itself, and hiring a solid team is an investment that will more than pay for itself in the long run. Hiring a solid team of employees will help you build a larger skillset, create new ideas, and save time by dividing up the workload.
Regardless of whether you are a product or service-based business, it’s always essential to invest in hiring a solid team. No matter how good you are at your job, it’s impossible to scale a business by yourself—you need a team of smart, dedicated people by your side.
While it may seem like a luxury, investing in insurance is a crucial step for the success of your business. Issues such as property damage, events that interrupt the regular operation of your business, employment-related lawsuits, or your products and services unintentionally causing harm to your customers can happen – and they typically occur at the worst possible time. When this happens, insurance comes into play.
Buying insurance is all about protecting your company and your employees from unforeseen risks – thus enabling your business to continue operating with minimal disruption even during difficult times. Insurance will allow you to manage these risks and help you survive and thrive despite them.
The last key area for you to be spending money is just that—money. Investing in people who understand the financials of your business is an essential part of ensuring sure your business makes it past that five-year mark.
Having a CFO or accountant is crucial to help you maximize your profit, keep track of your cash flow, and plan for future investments. Additionally, investing in a tax professional is an investment that will definitely pay for itself in the long run. A tax professional will help you understand tax-deductible areas where you can be saving money. It’s also important to note that a tax professional is an expense that is, in itself, tax-deductible.
When starting a new business, it’s crucial to be investing in the right things. Set yourself apart from the rest by putting your money in areas that will generate the highest long-term return on investment for your business. For a complete guide to what to spend money on when starting a business, check out the infographic from JW Surety Bonds below.