If you’re a business owner, you’ve probably heard the saying “It takes money to make money,” a hundred times. Why? Because there is some truth to it. Now, that being said, having money to invest in your business is good, but not always a necessity. So if you don’t have the cash readily on hand, you need to think twice before accepting outside financing.
Consider not asking for a loan if you cannot prove that this investment will grow your business and allow you to make the profits to pay it back. With that being said, here are a few examples of investments that can fuel business growth.
When you think of growth, you should think first of marketing. After all, the sole reason you market your business is to grow it. But try to think about marketing in terms of investment.
If you haven’t been able to reach as large of a market as you’d like due to your budget. It might be the right move to take out a loan to help increase your reach. If you have a technique that steadily delivers customers, look at how much you are spending on it. Try to get an idea of how much you are spending per customer you are acquiring. Then decide on the loan amount you want.Obviously, if your profit is greater than the cost, taking out a loan to increase your marketing reach could be a great growth strategy.
Many businesses take on debt to try new marketing ideas or more. Maybe they will work, but they’re not as sure of an investment. Most professionals won’t recommend taking out a loan for a marketing experiment.
Expansion is another reason for taking out a new loan is if your business model is working great. Maybe your business is booming, and you’re so popular that you’re constantly overbooked? If you’ve found this kind of success it might be time to consider a loan to help you expand to a new location. If you can harness what has made your current location prosperous and do your best to recreate it, then you should try your best to keep that momentum going. But, before moving forward, try to be as sure as you can that the potential profits of the new location will be greater than the cost of the loan.
A new equipment purchase that would enable you to add more services to your business or perhaps increase your rate of production, is also a bonafide reason for taking out a new loan. Investing in equipment can often be a very tactical way to see how the benefit can outweigh the cost. If you can take out a loan to cover the initial cost of new equipment, but you can also easily do the math to see that your profit increase will be enough to cover the cost of the loan, then go for it.
If your supply is currently lower than your demand, this could be a smart decision. Whenever you can produce your inventory at a faster rate, giving you more product to sell you can count on your business growing.
There may come a time that you need to fuel growth by taking on a form of outside financing. If you think it could take your business to the next level, do the math. Make sure you know if this investment can take you where you want to go and bring in enough profit to pay back the debt.