As your business grows, you’ll find yourself making decisions about when, how much and how you should invest to facilitate or speed further growth. In this article we’ll look at some of the issues surrounding investment in your growing business, to help you narrow down those choices.

Assessing your position

It’s important that any investment in your business is carefully considered, in terms of the budget available and what you want to achieve. As a starting point, we suggest you assess:

• Your business finances

• Your personal finances

• Your business goals

You can then use this information to inform your business decisions, so you can better decide how much you can afford to invest, and what you should be aiming to achieve with that investment.

Your business finances

The money you’re investing into growing your business needs to come from somewhere, and a close look at your business finances will show you if it can come from income your business generates, or if you need to seek financing from elsewhere.

Before you decide to invest part of your business income back into your business, you need to ensure that your expenses are covered. This will include covering operating costs and taxes, and it may include paying yourself as well.

If your business can’t generate all the money you need in the time you have, you might look at sourcing finance either from a business loan or from an investor. You’ll need to look at each offer individually, in detail, before deciding to go ahead.

As your accountant, we can help you by providing accurate information and insights into your financial position, but we can only offer advice. Ultimately, you must decide whether, when and how to invest in your business.

Your personal finances

Ordinarily you may not see your personal finances as having very much to do with your business, but in this case, you need to consider how much income to you need to generate for yourself. Is this business your main source of income? Can you afford to stop paying yourself while you invest for growth? If you rely on your business to support yourself and your family, it’s important to consider this in your investment plans, and your personal finances will play an important part in your decisions.

Your business goals

Once you’ve decided to invest and you’ve raised the money, your next challenge is to decide where the money goes. This will obviously depend on your business, and there’s a huge variety of things it could go into. The main thing to remember is that your investment should provide value for your business – usually either increasing revenue or reducing costs.

Decide on your key metrics

It’s safe to say you’re expecting something to happen when you spend this money. What changes are you expecting to create, how will this benefit your business, and what numbers can you track to ensure it’s really happening? Make sure you know what your key metrics are ahead of time, and benchmark against where they were before your investment.

Be prepared to re-evaluate

It’s likely that you’ll have more than one option for where your investment could go, and there might be dozens of “good” opportunities you’ll have to ignore in order to fully commit to the best one.

To keep yourself on track, and reassure yourself that you made the right choice, you can set goals for your key metrics, and set a timeline for re-evaluating your decision.

For example, if you’ve decided to invest in social media marketing to help you reach more customers, you might set your benchmark at 3:1 – meaning you expect your marketing activity to make you £3 for every £1 you spend. If the return on your investment drops below this, that’s a good indication that you need to re-evaluate and consider an alternative plan.

So, is now the right time to invest?

With all these things to consider, there’s no one clear answer about whether it’s the right time to invest, or what the best investment is for your specific business. It’ll always depend on your business’ finances, your personal finances, your goals, and external factors in the market you’re working in.

It’s also important to remember that if it’s not the right time to scale your business, either because of hard financial factors or because of where you are personally, that’s fine as well. The important thing is to make a deliberate decision and act according to a considered strategy, rather than random guesswork.

If you have questions or if we can help in any way, please call our expert team on 01296 468483 or email info@orangegenie.com.