The right investment strategy can help grow a business exponentially while stabilizing market share and providing future revenue opportunities. Sometimes organic growth expenditures are necessary to generate additional revenues or positive cash flows and fund growth initiatives. Companies face the same inherent financial hurdles regardless of size, but business funding can be especially difficult to secure for smaller companies. Fortunately, an intelligent investment strategy with a focus on resource allocation can help simplify the process.
Three-fold Investment for Small Business Resource Allocation:
There is a three-fold investment hierarchy which helps small businesses allocate funding resources in a manner that typically proves not only beneficial, but profitable as well. This hierarchy involves following a capex outline in descending order to generate increased revenues and a higher return on investment. Allocating resources is a fundamental necessity that directly impacts daily operations. It can be difficult for business leaders to choose between seemingly important tasks and those that may improve company productivity.
For the highest rate of return on capital allocation, small businesses should focus on these three areas:
Increase Commitments
Whether your business operates online, or you have a brick and mortar location, you need funding to fulfill commitments. While fulfilling current commitments may not be an issue, additional funding can allow you to increase those commitments and ensure future revenue. This can give your business positive cash flow for six months or many years to come, depending on your industry and the length of your contracts. For instance, a small textile company may use additional funds to increase textile exporting commitments. Its increased share of textile exports could provide steady cash flow for future growth.
Training and Certification
The second tier involves investing in hands on training and certifications for your team. No matter your area of expertise, sharpening skills through knowledge and training is a fundamental necessity for long term success. This type of investment pays big dividends for your company over the course of time. Company team members who receive this kind of additional training typically become more efficient and productive in the work place translating into dollar signs for the business. Tom Siebel demonstrated this when he founded Siebel Systems. He used additional funding to put even seasoned executives through highly structured training in sales and operations. Decades later he sold his well-founded company to Oracle Corporation for over five-billion dollars.
Improvements in Operations
Last, but certainly not least, it is always wise to invest in company infrastructure. These are things that typically increase positive cash flow such as customer acquisition and satisfaction or manufacturing. This may be as simple as marketing, customer service or even purchasing additional equipment for the business. A wise investment in company productivity almost always generates additional revenues. In fact, recent studies show that companies who invest more in capex often enjoy more sales growth and a higher ROI than their company peers who don’t.
Generating Capital
Unfortunately, the time it takes to generate excess capital for allocation purposes is often prohibitive. Traditional business loans are no less forgiving. They typically have very stringent qualification guidelines, relying completely on credit scores and a lengthy timeline. Banks usually don’t generate much profit on small business loans and the restrictions can be stifling. Over 26 percent of small business owners report avoiding business expansion and hiring in recent years due to a lack of funding. This can be detrimental for a small business.
If your small business needs hassle free funding based on your business plan instead of your credit score, contact Reliant Funding today.
