What You Should Know About Investing in Your Business

5 min read

Running a successful online business usually requires a few things: a great idea, the right skills, and the right amount of resources.

Yes, no matter how good your product is, you’re going to need money to keep your company running smoothly.

That requires investments in your business.

As you grow and become more successful, investments can come from outside sources.

However, when you’re still small and starting out, the investment will likely have to come from you.

Investing in your business and determining how much to invest is not a light matter.

It’s your money after all. You want to make sure it’s going to the right areas so you can see continued success.

For many entrepreneurs, making the right investment in their own business can feel intimidating or even overwhelming. Where should the money go? What should it do? How much should be invested?

We’re here to provide some helpful tips that will hopefully answer these questions and more.

Keep in mind, we’re not investment or legal experts, so these are simply suggestions. Always consult with the pros before making a final decision.

Methods of Investing in Business

When it comes to giving money to your business, there are basically two methods.

The first is by loaning money to your company. The second is by actually investing it.

Let’s look at the first method.

Loaning money is just as you might expect — it’s a formal loan given to the business.

All the loan terms need to be put in writing to make sure you are doing this personally. It should also detail terms such as how repayment happens, interest rates, and more.

Although, you are probably more interested in the second method: investment.

This is where you take your money and put it directly into improving your business.

For most small companies, all you need to do to invest is write out a check and deposit it into a bank account created specifically for the business. This money can be categorized as “owner’s equity”.

Things might change, however, if you create a corporation.

If you incorporate your company, you can then invest in it by buying stock.

That may sound strange, especially if your company is pretty small, but even a business with a handful of stockholders can be classified as a “closely held corporation”.

Knowledge is Power

Now that you know the different methods of putting money into your business, let’s look at some other items you need before you make some final decisions.

More specifically, what do you need to know?

Your knowledge base begins with an understanding of your company’s finances.

When determining how much you should invest, you need to have an idea of what the future holds for your company.

This can be done by developing a forecast.

Much like with a weather forecast, this looks at different factors that will affect your business and predicts what will happen.

Do you expect your business to grow? What challenges may lie in wait? How will future marketing strategies pay off?

Based off of a forecast, you can figure out how much investment may be needed for your business.

Take a look at your business’s current financial situation.

Your recordkeeping should detail how much revenue your company is making each month. Then subtract your operating expenses and taxes.

As the owner of the company, you may be compensating yourself as well.

The money left over is your profit.

You may choose to invest that profit back into the company.

However, some entrepreneurs even decide to skip their own compensation and put that money back in their business instead.

That may depend on your own personal finances, which is the next thing you should become familiar with.

Some entrepreneurs rely on their businesses for their personal income. Others have a different primary source of income while their businesses are more of a side activity.

Which category do you fall in?

If you don’t have to rely on your business for everything, that gives you far more flexibility.

You can take some of the money you earn from other sources and simply apply that to your fledgling company.

That also allows you to take less compensation from your business, freeing up more investment money.

Things change when your income comes entirely from your business.

That doesn’t mean investing your money in your business is impossible. But it does require even more careful budgeting on your part.

Go into detail about what your personal expenses are. Know exactly what you’re paying in your personal life.

There are plenty of great budgeting apps available out there for you to use if you need help.

Or you could do it the old fashioned way with pencil, paper, and a calculator.

Either way, once you know your expenses, you’ll have a good idea what your disposable income is for each month.

This gives you the information you need for planning how much you will invest.

Where to Invest Your Money

By now, you know you want to invest in your business and about how much of it there will be.

The next step is planning out where that money will go.

There are a lot of different places you can invest your money within your business, even if you’re running a small operation.

Let’s look at a few of them.

Marketing efforts

In today’s online world, you can market to big audiences at a fraction of the cost.

Marketing gets more eyes on your product, and with more eyes come more people.

Part of that marketing investment should go to creating an effective sales funnel.

That’s where ClickFunnels comes in. Think about the return on investment you can get when you partner with ClickFunnels to create that sales funnel.

Your skills

Why not invest some of that money in yourself?

Running a business takes a unique skill set.

You constantly need to be learning and adapting.

Investing in management classes or learning new techniques can help you go far.

Your product

You already have a great product, but further investment can improve it.

You may even choose to use some of that money to create a new product, one that complements your original item.

Employees

Even if you have a small operation, you might still have employees.

Investing money in them and improving your company’s culture can go a long way toward making your business even better.

Like investing in your own skills, you may even choose to help your team get better by developing talents that will greatly benefit your business.

Networking

Investing in networking, or building up your business relationships, can also help your company.

Use investments to establish these relationships or make them stronger.

Think of it like a partnership where you both get better for working together.

Investing Helps You Reach Goals

As you invest in your business, you’re putting your money in a promise for the future.

Investing money means giving your business more resources to achieve the goals you want.

So with the help of ClickFunnels, you’ll be positioning your company for success as you see the results for yourself.

Don’t let investments intimidate you. They act like a vote of confidence in what you can bring to others.

How much have you invested in your online business? What kind of results have you seen? We’d love to hear from you. Sound off in the comments below.

Continued Reading

How to Start An Online Store

How to Build An Online Brand

SWOT Analysis: How and Why You Should Do a SWOT Analysis on your Business

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3 thoughts on “What You Should Know About Investing in Your Business

  1. I’ve always done this…. after all the Bill’s, overhead, taxes,etc are paid i take the profit and take at least 50% and invest that back into the business. Just a good practice.