« Small Business Resources « « How Best to Invest in Your Business
As a business owner, you've no doubt noticed that the marketplace and your customers' expectations change constantly. Your business needs to continually find new ways of keeping customers satisfied. Directing a portion of your profits back into the business can help it grow and position it for long-term success.
However, with limited resources, you'll find competing demands for your money, time and energy. The key is choosing investments that will make the biggest impact on your business, now and in the future. You'll probably want to start with improvements that will give your business the biggest return on investment. Carefully weigh the pros and cons of each possibility, because not every investment is right for every business.
Consider some of these common options for investing in your business:
Computer hardware—It's important to keep your computers up to date as technology advances, especially for the most high-tech areas of your business. In general, where information technology is concerned, “newer” equals faster and more secure. Your computers may experience heavy—and increasing—demand from:
- maintaining and securing data
- programs that use more and more memory
- more business tasks being done online
Faster computers may make your company more efficient, and up-to-date technology can help protect your business from the risk of data breaches.
Specialized equipment—From sewing machines for tailors to freezers for caterers, almost every business depends on specialized equipment, and it needs to operate at peak efficiency for the venture to be successful. When your equipment starts requiring frequent maintenance and repairs or no longer meets safety or environmental standards, it's time to replace it. Even if your current equipment is still serviceable, consider whether upgrading could help elevate productivity and sales. If you're considering whether to either buy or lease equipment, you may decide that you can't afford much upfront cost or need equipment that must be upgraded every few years, so leasing may be for you. However, buying may be better if you can afford a down payment and the equipment is expected to have a long usable lifespan.
Vehicles—If your business puts a lot of miles on its vehicles, it may pay to take advantage of advances in fuel efficiency or hybrid vehicles. New, sophisticated safety features could save you money on insurance and keep you and your employees safer. Plus, newer vehicles often require less maintenance, saving on mechanics' costs and keeping your vehicles on the road, where they can work for you. When deciding whether to buy or lease, talk to your tax advisor, since your choice can affect your tax deductions.
Commercial real estate—One of the risks of leasing space is that a drastic rent increase when the lease is up could suddenly make it unaffordable. Buying a property can eliminate that risk, though purchasing commercial real estate comes with its own risks. Questions to consider include:
- How does the amount of a mortgage payment compare to your current rent?
- How long do you intend to stay in the location?
- Does the available space allow for future expansion plans you may have?
- If you buy, can you easily sell or lease the building if your company moves out? A building that is adaptable to the needs of a variety of business types may be easier to sell or lease.
An experienced and knowledgeable Navy Federal Business Development Officer will work with you to explore financing options for investing in your business. Having a trusted partner who is looking out for your best interests can make the tough decisions a bit easier.