As the old saying goes, you've got to spend money to make money. Unfortunately, in concocting that turn of phrase, someone left out one very important word: "wisely." Anyone can spend money, but it takes a leader with incredible business acumen to put that money toward things that will grow his or her company.
Define a 'good' investment
Small business owners overseeing a budget don't have to predict the future, but they should be able to spot a rotten egg – and most importantly, steer their funds away from it. But how can a small business gauge what sorts of equipment or services are empirically worthwhile and which ones aren't?
"A sure thing can turn out to be a dud in disguise."
When in doubt, consult the company's annual business goals. You do have one, don't you? It's an organized, itemized list of all the things you hope to achieve this year and The Thriving Small Business believes it's a must-have, especially when planning or checking a budget. Essentially, a small business should measure its success according to the goals set forth in this battle plan. If, for example, an independent brewery plans to curb its energy consumption by 15 percent and does, any equipment or service invested toward that accomplishment was advantageous.
Never drain the coffers
Sometimes small businesses have to make not-so-small purchases, but just because a company has the money per se doesn't mean it should spend it. A small business budget works a lot like a piggy bank – little amounts can be siphoned off from the hole in the bottom or the whole hog can be cracked wide open. But once that piggy pops, there's pretty much no way to put it back together. Spending a significant portion of the budget in one fell swoop is a risky maneuver, even for the safest investments that fit premeditated business goals.
Small business owners thinking about emptying their budgets for large purchase should take a page out of All Business's playbook. Consider other lending options, like third-party financiers to help pay for the expensive stuff.
One day at a time
Planning ahead never hurt anyone, but don't look too far down the road. As Entrepreneur makes abundantly clear, a small business that saves up for some far-flung future when its company is adored by all could be ignoring one crucial factor today: profitability.
If a small business generates no profit, how can it be expected to continue? And in case there's a discrepancy between definitions, let's be as straightforward as possible. Profitability is not a day-by-day status, but momentum achieved after intelligent implementation of business goals. It's not the end of the world if a small business's profits happen to be down in one quarter over another, but they cannot be nonexistent. When managing seed money, anything that can't be justified as an investment toward establishing profitability should be tabled for a later date.
You can't win 'em all
Every once in a while, a sure thing turns out to be a dud in disguise. Managing financial risk means losing sometimes. But as long as small business owners always remember to prepare contingency plans, no snafu is too great to come back from. Every time a company leader approves allotment for one investment or another, those considerations should always come with a "what if" clause. Thinking ahead can keep your small business moving even in the toughest times.
Equipment and business industry piece brought to you by Marlin Equipment Finance, a nationwide provider of commercial lending solutions for small and mid-size businesses. Marlin's equipment financing and loan products are offered directly to businesses, and through third party vendor programs, which include manufacturers, distributors, independent dealers and brokers in the security, food services, healthcare, information technology, office technology and telecommunications sectors.