Previously, HBM has discussed how to save money in a home business start-up, including a number of helpful tips that can stretch your dollars in the early going. From strategic marketing, to logistical set-up, to shopping around for the right insurance, there are numerous ways to get your home business off the ground without spending the kind of money it may initially seem like you’ll need to spend.
But let’s fast-forward a few months, a year, or however long it takes to transform into a real, profitable business. At a certain point, if your business is a success, you’re going to generate income, which is of course the goal. However, it also presents an interesting dilemma for busy home entrepreneurs: how can you go about taking the time to strategically invest any spare income when you’re completely occupied running the business that’s generating that income in the first place? Most people who are proactive enough about their personal financial situations to start home businesses are likely interested in investing, when possible. However, in many cases, it’s just too time consuming to be bothered with.
So, I want to talk about a few ways for those folks to put their money to work.
The first practice that comes to mind is to simply hire a broker or invest in a mutual fund so that your money can be invested for you, rather than by you. And that’s certainly a viable strategy. Hiring your own account manager can be very expensive, and most professionals managing private accounts deal primarily with large amounts of money and diversified portfolios, so that may not be an ideal option. But a mutual fund can be pretty appealing for anyone too busy to make private investing decisions. By investing in a mutual fund, you’ve essentially hired a professional investor to monitor your portfolio’s holdings. That portfolio is diversified not because you put a ton of money into different stocks, but because others pooled into the same mutual fund have helped to spread it out. This is probably the most accessible hands-off means of effective investment, and it can put your income from your business to work fairly efficiently.
Still, many individuals prefer to have a little more control over the specific trades made with their money, in which case a mutual fund might be somewhat uncomfortable. Private investing is certainly possible for a business owner, but it will require a great deal of discipline and preparedness, particularly in the early going. One of the most important traits of any successful investor is to understand your own trading personality, including not only tendencies and preferences but timing and ability to devote attention to the practice of investment. For a business owner, that might mean recognizing that day trading in the stock market simply isn’t feasible, whereas some more flexible alternative methods could be of use. Whether that means currency trading, investing in real estate or precious artifacts over time, or simply managing your own account with a long-term approach, there are various ways to put your money to work in a way that coincides with the time you have to spend.
And finally, thinking of investing as a broader term, many small business owners will prefer to put any spare income to work by filtering it right back into the business—even past the point of necessity. Expert business owners and investors alike will almost always argue that reinvesting is the best way to build wealth, and really it’s a pretty simple concept: take whatever you can out of your profits and use that money to improve or expand the business, so that the next round of profits can be even greater. More often than not, this process is absolutely necessary as a small business finds its legs. But even if you improve effectively and become regularly profitable, you may consider ongoing reinvestment where appropriate.
Which of these strategies ultimately applies to you depends on your personal situation and the nature of your business. But don’t let yourself be convinced that you’re too busy running a company to put its profits to work!