1. Invest in Yourself
We all invest our time and money in people and things. The best investment for business owners is always going to be in themselves. This could mean your health, education, well-being or relationships - anything that can fine-tune and improve your life will bring the highest return on investment because the cost is often very small.
Invest in yourself in both small and big ways. For example, hire a housekeeper so that you can stay focused on higher-value tasks. Get a massage every week to relax. Spend time with your family without distractions. Often, prioritising time to exercise your body and mind will produce great returns.
Giving yourself set times to think and focus is a valuable investment. Look at the schedule of the world’s wealthiest entrepreneurs and you’ll uncover that comprehensive wellness is a high priority.
2. Invest in Your Business
If you can’t create the highest return on investment in your present business - then maybe you should rethink continuing to operate it. Entrepreneurs should flow to the area where they can generate the highest returns on time and money.
When you think about investing in your business, consider adding talent and equipment. Look toward creating new sales and marketing structures that perpetuate your sales cycle. Often, times entrepreneurs focus almost exclusively on top-line revenue growth that will lead to bottom-line profit gain. However, it is still critically important to focus on risk factors in one’s business.
Businesses are usually sold using a simple formula of earnings times a multiple. The multiple is driven by the risk factors inherent in the business. If we can reduce the risk factors, we can increase the multiple. Sometimes, decreasing the risks provides greater returns than one can achieve by focusing on increasing profits. This is especially true in the years leading up to a sale.
3. Invest in Tax Strategy
Successful business owners may not realise that their single biggest personal expense is their income taxes. By evaluating options to legally lower their taxes, entrepreneurs can often increase their net income anywhere from 10 percent to 50 percent with only small changes in the way that they operate their business and personal life.
This increased cash flow, if reinvested wisely, can dramatically impact your future.
It’s important to have the most tax efficient structure when you commence business, but circumstances often change and there are certain trigger points in the growth of a business that make revisiting the optimal structure worthwhile.
4. Invest in Real Estate
Real estate is another area where entrepreneurs should allocate capital. Real estate can often be used to house your business. We have seen many instances where the clients’ net proceeds from the sale of their real estate are greater than that of the sale of their business.
Real estate has many qualities that enhance its attractiveness, including tax benefits, the ability to use as leverage, inflation protection and more.
5. Invest in Life Insurance
Businesses too often dismiss investing in life or income protection insurance. They believe they are bullet proof and ‘it won’t happen to them’. We all know that is a fallacy and the opportunity to cover lost income from prolonged absence from the business or a capital sum should be part of your investment strategy. Life insurance is an incredible tool that can be used to enhance an overall financial plan.
6. Invest in Other Companies
When entrepreneurs have succeeded in growing their own business, they may find value in investing in other people’s companies, either actively or passively. Private equity returns are some of the highest of any asset class, but they also come with significant risks and a greater standard deviation between return expectations.
7. Invest in the Market
I would be remiss to not suggest that business owners also should build a diversified portfolio of publicly traded stocks or managed funds. Over time, publicly traded companies can produce average returns that exceed inflation by 4 percent to 8 percent. Another advantage of stocks over some other asset classes is the ability to sell them and generate cash within days.
Compounding your investments in managed funds or listed companies over a lifetime should result in significant wealth creation.
