Many business owners want to diversify how they earn so that their business is not their sole source of income. In discussing this with financial advisors, it is almost certain that one of the ways which will be discussed is investments. Independent financial advice will not only provides income, but is an excellent means of ensuring your financial future, so when you retire, your finances are not a concern.
That all sounds great, but one of the barriers business owners often come up against is that they have insufficient cash assets to make the investments. That is not to say their net worth is an issue, but instead, that much of their capital may be spoken for such as what they have invested in their business, their home and so on. This can leave them feeling frustrated knowing that their financial advisor’s advice to invest is sound, but they cannot act upon it due to limited cash funds.
If that sounds like a scenario you are in or could be, then there are solutions. Below were have outlined seven ways in which business owners can generate the liquid funds they need to create an investment portfolio. Not every one of these will suit your particular circumstances but if at least one of them do then you should be able to generate the cash you require.
Sell Equipment And Then Lease: If you use machinery or equipment within your business, including office equipment, then a simple way to generate cash is to sell that which you own, and then lease similar equipment for use within your business. This way you have a lump sum from the sales, and also no maintenance costs as these are covered by the leasing company.
Offer Discounts For Early Payments From Clients: If your business offers payment terms such as 28 days to your clients this can cause a log jam for your cash flow. You can break that log jam by offering excellent discount rates for those clients who pay you upfront or within 7 days, for example.
Sell Off Your Excess Inventory: How much excess and unsold inventory do you have within your warehouses and storerooms? If it is significant then you should consider selling it off. This not only generates cash but also frees up storage space for new stock that sells quickly thus creating more funds to invest.
Increase Your Prices: This usually scares business owners, but it is an excellent way of generating funds if done correctly. Test out various price points to see which are optimum for increasing revenue but which also do not reduce sales volume.
Speed Up Your Invoicing And Payment Procedures: When they assess their business’s procedures many business owners realise that their systems are clunky and too slow. Invoicing and payment procedures are two prime examples. Ensure your invoicing process is quick and that clients can make payments using multiple payment methods.
Renegotiate What You Pay Your Suppliers: It doesn’t take a financial genius to work out if you pay less for goods, your profits go up and that means additional cash to invest. Speak to your suppliers to negotiate lower prices or discounts for committing to longer-term contracts.
Sell A Share In Your Business; Whilst your financial advisor may well suggest you buy shares as part of your investment portfolio, to acquire the funds to make those investments an option you have to sell shares in your company. It could only be 10% so that you remain the majority shareholder by far. However, if your company is worth $500,000, that means you have $50,000 to invest in your long-term financial future.