Small business owners have plenty on their plates. From marketing and sales to logistics, HR, and more, there are numerous tasks to complete in order to keep an organization running smoothly. Then there are also the smaller details that can seem like a secondary priority at first.
However, as every business owner knows, these smaller details can also have a big impact down the road. If you own your own business, that means you’re probably working with tight budget restrictions.
That’s why it’s important to find smart ways to manage your money while staying strategic about what your long-term goals are as an entrepreneur and business owner.
There are a lot of different options when it comes to investing or saving money for your small business. You can learn about these investments from books, infographics, and articles on the internet. But, to save you time, here’s a look at some of your best options as a small business owner:
Investment and Saving Options For Small Business Owners
1. Saving for Growth
When people think about saving for their future, they often think in terms of stashing money away to protect against the risk of an emergency. Small business owners, though, have additional considerations when it comes to saving for retirement and other long-term goals.
First, having cash on hand can come in handy if you’re starting out as a one-person operation and need to purchase inventory. That can be a challenge if you’re just starting and don’t have any savings.
What’s more, if you’re looking to grow your business – and that’s the goal for many entrepreneurs – you’ll want to invest your savings in a way that will generate long-term growth.
2. Savings Accounts
A savings account is one of the most basic and straightforward ways to save money – and it’s a great option for those who are just starting to build up savings with a small business.
Among the advantages of a savings account is the fact that it’s extremely easy to set up. You can do it online, and there’s no minimum amount you need to deposit.
While interest rates are relatively low compared to other investment options, they’re generally stable and reliable. Plus, if you’re just starting out, you can use your savings account to build up a small emergency fund without worrying about losing money in the stock market.
Like savings accounts, bonds are a low-risk investment option that is ideal for those who are just starting to build up a portfolio and earn interest on their savings. You can purchase government and corporate bonds through a brokerage account or online broker.
While interest rates may be slightly higher than what you’d earn on a savings account, you can rest assured that the money you put into a bond is safe – unlike stock investments, which are riskier but offer a higher return.
This type of investment is perfect for those who just begin to invest. You don’t need to monitor your bonds every time, so you can leave your money there and let it grow slowly.
4. Equity Investments
For small business owners who want to make investments with a high return and the potential to grow their savings over time, equity investments are ideal. Equity investments include investing in emerging companies in exchange for a percentage of their company.
Your investment could earn you a significant return should the company experience rapid growth and go public or be acquired by another company. If your investment doesn’t pan out, though, you could lose all of your money.
Keep in mind that equity investments come with a high level of risk because you’re putting money into companies that are still in the early stages of development. You may have to wait a long time before your investment pays off. However, if you choose wisely, you may be able to find high-earning, low-risk investments that can help you grow your savings and the future of your small business.
5. Mutual Funds
If you’re looking for a safe yet effective way to grow your savings for the future, you may want to consider investing in mutual funds.
Mutual funds allow you to pool your money with that of other investors in order to purchase a variety of stocks and assets. While you don’t have direct control over which stocks you buy, mutual funds allow you to spread your investment across a wide variety of stocks in order to minimize your risk.
You may want to choose mutual funds that focus on certain sectors, such as tech or finance, to help ensure that your money will be well-placed no matter what happens in the global economy. Although mutual funds are generally safe and secure investments, you may want to choose funds that are low-risk in order to protect your savings in case the economy takes a downturn.
6. Hedge Funds
Compared to many other types of investments, hedge funds are extremely high-risk and are not ideal for small business owners who are new to investing. That’s because hedge funds typically focus on short-term, high-level risk-taking that can result in quick, high-return gains for investors.
While hedge funds may be an option for those who already have substantial savings to invest in, they’re not a good fit for those who are just starting out. If you’re serious about investing in hedge funds, you’ll need at least $500,000 to put towards your investment and a significant amount of capital to begin with.
Buying into a hedge fund also comes with a high level of risk, since most funds are not diversified and are not guaranteed to be safe. If you’re beginning to invest with a small business savings account, hedge funds are not the ideal option for you.
7. Private Equity Investment
Compared to bonds and mutual funds, private equity is a more exclusive and sophisticated investment option. This type of investment is typically reserved for high-net-worth individuals and organizations.
Private equity investment allows you to invest in a single company or asset. You may want to pay attention to particular sectors, such as transportation or real estate, or look for opportunities in growing markets. The drawback to private equity investment is that you have no control over how or when you’ll receive a return on your investment.
If you want to invest in private equity, you’ll need a significant amount of money, to begin with. You’ll also want to partner with a trusted and experienced investment professional who can help you choose the right opportunity to invest your savings.
The Bottom Line
Small business owners are a special breed, and they have a variety of challenges and concerns that others may not ever have to grapple with. With so much on the line, it makes sense to have a healthy distrust of the stock market, since it’s a wild and unpredictable place and the typical person can’t access anything beyond what they see in the headlines.
There are plenty of ways to save money and grow your savings for the future, but it’s important to choose the right investment option for your situation.
A savings account is low-risk but offers a very low return, while hedge funds are high-risk but also come with a high rate of return. Depending on your goals and needs, you can choose the best investment option for your situation. Good luck!
Andre Oentoro is the founder of Breadnbeyond, an award-winning explainer video production company. He helps businesses increase conversion rates, close more sales, and get positive ROI from explainer videos (in that order).
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