No small business owner deliberately mismanages their money. Indeed, even the worst financial decisions are made with the best of intentions. The unfortunate truth is though, plenty of entrepreneurs simply make mistakes when it comes to investing their working capital. However, there are ways you can mitigate against fiscal catastrophe –– and ensure your business stays on the right track. Here are four investment plays you should avoid like the plague:
If your business has experienced substantial gains over the past couple of months, you may be tempted to expand your operation quickly. Opening up a new location, hiring new staff, or adding onto your current setup might sound great now during a period of high profits. But before you begin your expansion in earnest you need to be certain of your company’s sustainability. Jumping into new markets and spreading yourself too thin is one of the fastest ways a successful business can go bust.
Fads and Flavors-of-the-Month
The stock market –– like nearly everything else in our society –– is subject to fads and unpredictable trends that fluctuate wildly. One of the latest and most prevalent was the Bitcoin and cryptocurrency boom of the past few months. So though you may be intrigued by such an investment, understand that often your chances of striking it rich this way are slim at best.
Utilizing Personal Savings
You shouldn’t treat your savings account like a checkbook. If your business experiences a cash-flow problem, resist the urge to dip into your personal accounts before considering all other options first. Note that there are a wide variety of secured business loans that can benefit your company, and provide you with the funding you need. Plus, this way you can avoid gambling with your own personal funding.
No smart entrepreneur would put all their eggs in one basket. That’s why it’s essential to diversify your investment portfolio. Otherwise your entire financial standing could collapse with one bad turn. Make sure to spread your chips around to ensure you’ll never go bankrupt because of one bad decision. No matter how certain you are of success, always be cautious about an investment that could sink you. Because one day –– it might.
The Bottom Line
Regardless of your financial standing, you can always make wise decisions to improve your own situation –– and your business’s –– even while on a budget. Just remember to stay objective, calm, and avoid making any of the above mistakes. Do that, and you’ll be well on your way to fiduciary stability in no time!