Contrary to popular belief, there are very few objectively “good or bad” business investments. Rather, there are investments that make sense given a set of circumstances, and then there are investments that don’t. Two different businesses could decide to invest in the exact same software, for instance, and yet have wildly different experiences and results with it. That’s why business owners need to know how to make smart investments for their company specifically if they want to build an enterprise from scratch. Here, we’ll explain a few fundamental rules that will help you determine if something is worth your time and money:
Return on Investment vs Risk Management
The first thing a business owner should consider when making an investment is the potential for return. It may be tempting to dismiss a venture because of a steep initial outlay. However, if an investment promises a high return, then it’s worth considering further. From there, a business owner should look to calculate the risk involved in a venture. Obviously, an investment with a potential for a big return that presents minimal risk is going to be desirable. Sadly, few investments are this straightforward.
Talk to Your Team
While business owners have the final say on whether or not to pursue an investment, that doesn’t mean they should ignore feedback or advice from their employees. In fact, the opposite is true. Business owners who make wise investments consistently speak with their staff and monitor their concerns, ambitions, and needs. Good investments address staff issues and will provide intangible benefits such as enhanced morale and trust, in addition to “hard” advantages like improved productivity.
Check Your Emotions
Regular consumers are guilty of making impulse buys occasionally. It’s one thing for the average person to spend too much on a pair of shoes or new headphones. It’s quite another for a business owner to make an impulsive purchase decision. Yet, strange though it may sound, business owners can get swept up in a sales pitch just like anyone else. That’s why it’s key to always give yourself plenty of time to think about a big investment and make sure you’re doing it for the right reasons. Letting your heart rule your head will cause trouble sooner than later.
Rent When You Can
While business owners naturally like to seek out long-term solutions to problems, sometimes it’s better to look for a more cost-effective temporary measure. Hiring freelancers and renting equipment from time to time may actually prove a better use of your finances than digging deep to resolve a relatively minor or infrequent issue. On the other hand, if your company is constantly renting items like billboard barricades for events or construction, for instance, then it may be time to invest in your own set. (For more information on this subject, contact a company like OTW Safety.)
The Bottom Line
At the end of the day, making a smart purchase decision requires plenty of research and risk management. But the more informed you are, the better your decisions will invariably prove.