“Mumpreneurism,” or the idea of a mother running a business from home, has become very trendy of late. Thanks in large part to the increasing availability of online and mobile tools to start, grow, and support businesses, mums all over the world are finding new ways to generate income even as they’re busy keeping track of children and home upkeep. But as if all that isn’t enough to keep track of, mumpreneurism brings with it one huge new responsibility that goes beyond the basic management of whatever business is at hand: handling profits.
More specifically, there’s a responsibility for any small business owner to manage early profits in a way that facilitates the growth of that business. It’s often referred to as “reinvestment”—the idea of funneling funds back into a business in order to generate more down the line. The process is tricky, and there are numerous ways to go about it, but it’s also vital. So here are a few tips for strategic reinvestment.
Pay Off Debts First Many misunderstand the need to pay off debts as a sort of side financial venture, rather than an aspect of growth and reinvestment. By nature, a debt will weigh down a business (and grow increasingly costly) as long as it’s left unattended. Interest rates will mean that the longer you go without paying down a debt the more you’ll earn. Also, just waiting until later doesn’t necessarily mean you’ll have more money from the business to attack the debt. There are numerous strategies for digging out of debt for a small business, but the most important thing is to prioritise whichever process you choose. It may hurt to do it, and it may make you feel as if your business isn’t generating any revenue, but putting this step first frees you up for more directly growth-related investments later.
Invest In Marketing It should go without saying that your first priorities alongside paying off debt should be to pay for any aspects of the business that aren’t up to speed. For instance if you’ve been unable to build an app yet, or if you need to expand inventory or improve upon a prototype product, these things need to come first; the business can’t function without them. However, assuming you’ve reached a point at which your business is functional, the most important area to target with reinvested funds is marketing. By investing in expansion of your brand recognition, you can effectively make yourself a bigger target to potential customers. Even if you’re not entirely prepared yet to handle significantly increased demand, there’s no harm in getting your name out there and starting a buzz. You’ll attract new business, and possibly even investors.
Find Assets You Can Manage Not every investment decision for a small business amounts to re-investment. It’s important for a growing business to have funds available for whatever needs may arise, and for that reason some small business owners find it prudent to invest available profits in stocks or other assets in an attempt to grow a fund on behalf of the business. This is easier said than done, largely because managing investments can be a full-time job, and simply isn’t realistic for someone running a business. The forex market (aka the currency trade) is one option that some consider, given that you can access the market 24/7. The ability to trade after hours can give a busy mum full control over the investment even if only for a few hours a week at night. But this is merely one idea. Some may prefer the idea of putting business profits into a mutual fund and this is quite reasonable as AlliabceBernstein Funds results speak for themselves; others may be able to afford a full-time account manager. Whatever the case, finding an investment you can manage or have faith in is a nice way to facilitate possible growth of profits.
Start A Rainy Day Fund Finally, it’s a good idea to try to set whatever money you can aside in a rainy day fund for your business. This is common advice in personal finance, and it feels more like a precaution than a direct reinvestment. But rest assured, the day will come when your business faces a sudden need for cash that you may not otherwise have on hand! If there’s anything at all left over from paying debts, maintaining the business, investing, and doing what you can for yourself and any employees you may have, it should go into a rainy day fund.
This post was contributed by Adam Wilson