Renée— In business, the question of where you should put your money is a rather important one. For the purpose of this post, I feel I must state that both the question and the answer assume that the business in question is turning a healthy profit. The act of putting money into a failing business isn’t usually seen as a wise move, so I prefer to leave that alone.
When deciding where to invest money in your business, you should ask yourself the following questions:
1. How will this increase productivity?
2. How will this increase efficiency?
3. How will this save me money?
4. How will this increase sales?
5. What will be the return on investment?
6. How long will it take to see a return on my investment?
If the product or service you wish to purchase provides you with a satisfactory answer to any one of these questions, then going ahead makes good sense. The truth is, most seasoned business owners have no difficulty figuring out where to spend their money. What they may be unaware of, however, are the many ways to fund their business that will not deplete their own cash reserves.
The fine art of using OPM (Other People’s Money)
I first read about the concept of using other people’s money to make money, several years ago through Richard Kiosaki, author of Rich Dad, Poor Dad. I later discovered that rich people never use their own money to fund anything, even when they can well afford to. Warren Buffet, Oprah Winfrey and Peter Drucker all use other people’s money. In fact, Peter Drucker’s very definition of business is “other people’s money”. That says a lot. Use other people’s money to create a business and sustain it. The following are some sources of other people’s money you may not have thought to access.
Government grants and loans: This is one of my favourites. The Canadian government provides a multitude of grants and guaranteed loans to support businesses. For example, if you want to purchase a small business, the government will give you a guaranteed loan of $375, 000 to make improvements, purchase equipment, etc. and up to $1 million if you are also purchasing the real estate. The beauty of this, is that if things go sideways, you are only on the hook for 25% of the debt. The government will give the remainder to the bank and you will owe nothing more. My brother did this 12 times while building a very lucrative fitness chain in British Columbia, so I know it works very well.
Business owners can also access $10, 000 per employee to pay for training programs, so there is no excuse not to invest in that! You can also hire more employees and access subsidies for wages for employees under the age of 30, minorities, immigrants, people with disabilities, marginalized citizens, summer students, etc.
If you would like to expand your product line by developing something new, grants are available for research and development, and innovation. Likewise, you can also get free money for adopting green initiatives, developing green technologies, purchasing hybrid vehicles, retrofitting lights and much more.
If you are interested in exporting your product to other countries, the Canadian government will also give you up to $90,000 to help you build business relationships abroad.
The Canadian government even provides equity investment to Canadian businesses. In fact, there are so many funding opportunities provided by our government, you should really check this Government of Canada website before you look anywhere else for money.
Angel Investors and Silent Partners: If you are planning to take your business into a whole new realm but need a little help from someone who would gladly provide funding with little interference, then you should consider accessing angel investors or a silent partner. There are not-for profit organizations that help entrepreneurs find investors and there are venture capitalists who also provide the service of matching business owners to investors. You could also check with business lawyers, accountants and investment bankers to see who they have in their network to help you out.
Crowd Funding: People use crowd funding sites for all sorts of things. We often think of crowdfunding as a way for ordinary people to get in early on a developing technology, but crowd funding can be a lot of different things to a lot of different people. The trick to successful crowd finding is in how you position your plea and how well you leverage your existing social network. Offering something to contributors is better than offering nothing, unless you are donating to a charity. You need to be very creative with crowd funding initiatives because the space has become quite crowded and the novelty of helping people out for nothing is wearing off. I get requests from LinkedIn contacts all the time to contribute to campaigns, but I rarely see any compelling reason as to why I should. Should the first interaction you have with someone through social media be about getting money from them? Not at all, and that is why you need to really strategize a complete approach to your crowd funding campaign. Asking won’t necessarily lead to getting.
Bank Loans: Sometimes working out a bank loan for something that will help your business is still a pretty good idea. Shop around for the best rates and see who really takes an interest in supporting your business. I’m going to put another plug in for the Canadian government here. BDC is a bank that is a crown corporation set up to support Canadian businesses. Since they do not have the revenue targets that the other banks have, there is less pressure to sell you something you don’t need and a greater inclination to actually help you find a better business solution. There was a time, when many business owners did not find BDC to be very helpful, but I have been hearing a lot of good things about them lately from different business owners who have used them. They are much easier to deal with than before, so don’t discount the value of paying them a visit.
In summary, I guess the answer to the question, “Where should I spend my money?” is really to not spend any of your money at all. Use other people’s money, instead!
Thanks to the social media platform beBee, Renée Cormier & Graham Edwards developed a business relationship and friendship that typically involves regular meetings, goal setting sessions, etc. Our meetings often provide the fuel for plans around business strategy, blog ideas and more.
