Categories: HiddenInvestment

What Type Of Investment Is Right For Your Business?

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As the saying goes, you have to ‘speculate to accumulate’. As anyone with a stock trading account will attest, when it comes to the market this means taking some form of calculated risk in a bid to make your funds grow further.

In a business context, the principle is the same. In order to achieve growth you need to be able to take calculated risks on the right investments to unlock your potential. So, what are those risks, and which ones should you be looking to take?

People

Your workforce is likely to be one of your biggest investments as a business. If you don’t have enough people at your disposal it’s unlikely that you’ll have the manpower to take on bigger orders and achieve growth. However, take too many people on too early and you’ll be left with a big wage bill and little profit left over. The average South African’s take home pay is about R14,000 a month, although this will clearly be higher for specialist workers.

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It’s vital that you are clear about the full cost of hiring and the return you can expect to see from this investment. It’s also important that you hire the right people as getting this wrong could be a costly mistake. The right employee, with the right level of skills, experience and contacts, could be an integral part of your growth plan – allowing you to work at a greater scale, with greater efficiency and maybe even branch out into new areas.

Hardware and software

Sometimes, however, you might have plenty of staff but not the tools for them to be able to deliver the work you need them to do. Investing in hardware and/or software is important for all businesses to consider, especially in an age in which technological advancements are constantly throwing up new ways of working.

For hardware, it’s vital to consider how long you can expect a piece of equipment to last – be that a vehicle, piece of machinery or computer. That was you can calculate the cost over its expected life time and assess the value of the investment you are making.

When it comes to software it’s important not to invest in programs and packages ‘for the sake of it’. There are plenty of pieces of software that look and sound great but do very little for your business. A good piece of software should enable you to carry out a function quicker, cheaper and safer than before, freeing up time for your employees to focus on money-making opportunities.

Premises

You should also consider where you are doing your business. Have you outlived your existing premises? Maybe you’ve spotted an opportunity to grow into a new market and need ‘boots on the ground’ in a different location?

You need to think about where your customers are, whether you need face-to-face interaction with them and the costs of commercial property and employees in a particular location. Some South African cities are a lot more expensive than others and you might have to wait to find a suitable space at a cost you can afford.

Think carefully about the location, the amenities and the growth potential before investing in a new building for your business.

The importance of a plan

Just as with stock market investments, all of the above come with an element of risk. The wrong employee, a poor piece or hardware or an ill-suited office could all end up costing your business money. That’s why it’s important to plan properly for your investment. You should always:

  • Conduct research into what exactly your business needs and why (Eg, why a staff member and not hardware? Why is this piece of software better than your existing program? Could you find a cheaper office in a better location?)
  • Scope out the potential rewards from an investment – and a ‘worst case scenario’. If you couldn’t afford the latter then you need to revisit your plan because the risk is too great.
  • Consider the wider picture and how your investment fits in. A new employee might well allow you to boost your production levels, for example, but if this isn’t your businesses focus then is it the right investment for this time?

With a plan in place you can ensure your business investments are calculated risks and not just outright risks and, therefore, boost your chances of success.


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Tags: investment

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