How to invest your money when starting a business: 7 top tips

on Mar 29, 2021
Updated: Mar 18, 2022
  • The best ways to spend your money as a small business owner
  • How to lay the groundwork for a successful business
  • Why you should take a long term view with your investments

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Cash is the most important thing in any new business. The first step is finding it; the next is knowing how to spend it wisely. This article cuts through the noise to pick out the most important things so you learn how to manage a small business and what you should spend your money on.

Whether you’re starting out with money you saved up, a bank loan, or a big lump sum from your investors, you want to put that money to work so you can become a self-sustaining, profitable business as soon as possible. Here are seven things to think about when investing in your business.

1. Hire the right people

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When you’re starting out you want employees who can add the maximum value to your company. As a small business, you’re going to have fewer employees and staffing costs will be one of your biggest long term expenses. This is the best time to create a company culture, so find the right people in the areas you most need them.

Make sure to prioritise the parts of your business that you need to invest in first. If you’re developing an app, then attracting software engineers to create the best possible product might be the first investment. You don’t want to invest a lot of money in salespeople to sell a product that’s still in development, but you do want to have them raring to go as soon as it’s ready

2. Buy the equipment you need

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Another of your biggest expenses will be the tools and spaces for your team to work in. You might need powerful computers, high-tech machinery, or simply a warehouse to store your goods. Remember that you’re investing now so that you can make more money in the future, so while the current needs of the business are important, you’ve got to operate with a long term view.

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You don’t want to overspend, but you do want to think about where you want to be in a year or two. It might be prudent to spend a bit extra now to get a bigger office space or more hardware to give you the capacity to expand.

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3. Invest in software to help you scale up

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Don’t forget about the admin side of the business. It might not be as exciting as your main focus, but you need to take care of things like payroll and bookkeeping. This is especially true if your early plans don’t include a full time human resources or accounting team. Again, spend a bit more now to create a system that can scale up with you as the business grows. 

Think about how everyone is going to work together. Are they all going to be in the same place? If not, then you need to be able to meet and chat online, and clear communication channels will make your team more productive. These days, there are lots of software tools designed specifically to solve these problems.

4. Research and develop new product ideas

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Dedicate some money to improving your products or service. Some of the biggest name startups invest a lot of their revenue back into their product to maximise growth at the expense of profits early on. For the likes of Netflix, that means new content, for a biotech startup like Moderna it’s all about researching new treatments.

You might operate on a smaller scale, but the principle is the same. If you have an innovative product, how can you improve or expand it? Can you access a wider market by creating something new? Don’t stray from your area of expertise, but you don’t want to stand still and let the competition catch up.

5. Capture an audience

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The hardest part of starting a new business is getting yourself noticed. The ideal way to spread the word is organically with word-of-mouth recommendations but sometimes you need more help. You want to dedicate some of your budget to marketing and advertising because you need to attract customers to grow.

It’s another area where it’s easy to overspend but think about what suits your business. Some of the less expensive options are social media accounts and starting a podcast or a blog. If you’re willing to spend more money you can get a great website built or set up some online advertising on Google or Facebook.

6. Keep cash on hand

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Don’t invest everything all at once. It’s important to keep some money back for a rainy day or to capitalise if an opportunity presents itself. You don’t want to miss out on your big chance because you have no free capital.

You have to decide how much of a security blanket you need but a rough rule of thumb is to keep at least enough cash to cover six months worth of expenses. That way you won’t have to take out expensive short term loans or get into financial trouble even if sales dry up completely.  To avoid financial trouble, you will need to take a small business startup loan.

7. Make your own investments

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You want to always have something in reserve, and growing this amount will also be helpful. The more you can invest in your business, the better its chances of success. One way to grow your capital over time is on the stock market, as stocks and shares generally offer a better return than a savings account.

As a business owner it’s best to stick to low-risk investments, which can be blue-chip companies – like Google or Amazon – or index funds that track a particular stock exchange’s performance. You don’t want to take chances when this extra cash might be useful in the future. 

Always plan ahead

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Your horizons are always long term when investing. Keep a focus on building something for the future at all times. Only you know where your priorities lie and it depends on your industry and how quickly you’re trying to grow, and therefore you’re the best person to decide how to allocate your resources.

Through it all, you want to keep one eye on the present and one on the future. When it comes to your staff and strategy in particular, the investments you make now are vital to your long term prospects for success.


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