Should you really invest in your business?

Many people start their own small business as a result of redundancy or early retirement. Loaded with a large sum of money in the bank they start exploring their ideas and using their savings to fund the way. However without a clear end in mind and solid business plan these savings are usually gobbled up and the ‘entrepreneur’ is left with nothing but a damaged ego.

If I said to you ‘Give me £20k and I’ll give you a job that will challenge you every single day, make it hard for you to take time off, overload you with new skills to develop, make you feel nothing is ever finished, and tell you to go and find complete strangers to buy YOU’ – would you take up this offer?

Not likely. Yet this is what so many people are doing. When you spend your savings on starting a new business you are investing in your business. Every month you have living costs that need to be paid out, and this is the sum of money you are investing in. But have you got a plan to ensure that this money is paid back? Is your business idea scalable enough to earn you this amount of money every month? What is required to earn that amount? Will you be able to profit and save for a day when you don’t have to work?

And will you ever earn the investment back that you spend getting into the business?

If you invested £20k, how long will it take for you to earn that £20k back? And will you be in a stronger emotional and physical position to make that £20k worthwhile? Will it now put you in a position to profit the £20k you originally invested and make it grow? If not, then that £20k would have done a lot better in a high interest savings account. At least then you’d have something to show for it.

When beginning your business – think smart. Ensure that you are funding your research and development from a cash that is flowing into your business (normally from a job) and not from your savings. Before getting started ensure that you have a viable business plan that will pay you a healthy return for your investment. Ensure that you are very clear on what is required of you to succeed in that business and that you have the skills necessary to make it work.

 

Related Article: Should your Activity be Business or Recreation

Naomi Johnson is the author of Grass Roots to Green Shoots, available now. In 2008 after a catalogue of mistakes Naomi had to close down her coaching business after three years of blood, sweat and tears. Now she is a highly sought after  small business consultant in London. This bo ok shares the wisdom she learnt on the way and offers an insightful read that will help any small business entrepreneur who wants to avoid the pitfalls and be a success!

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