It can be difficult to prioritise what areas of your business to invest in to ensure it continues to grow and thrive. There is no perfect recipe for investing in your business to boost growth. The key is figuring out where to start.
Prioritising what to invest in is an ongoing process. It is key to think of it as an iterative decision that is addressed regularly as your business grows. A smart investment now is not necessarily going to provide the same yields in six months. Your investment plan should be flexible so you can react accordingly to the ebb and flow of investment capital. While it is important to reinvest your money in growing your business, that is not always going to be viable. It is more important to have a solid business than an expanding one. If your current customer base is dissatisfied, it will be difficult to grow it in the future.
Step One: Create a plan for strategic growth
Creating a strategic plan for growth should be your first step when prioritising which parts of your business to invest in. Analyse past periods of growth and sluggishness to discover what works and what doesn’t. It is also important to establish whether your business’ recent growth has been slow and steady or whether it has been marked by bouts of increased demand forcing rapid growth. The plan should take into account your current and future cash flow so that you are not shortchanging yourself when it comes to the future operational needs of your business.
Step Two: Determine your challenges to growth and how to tackle them
Identifying your current stumbling blocks to growth is a useful starting point when creating a plan. Once you’ve established these, you can identify ways to overcome them. Now you have a list of potential areas for investments and can take some time to prioritise where your money is going to go. The ICE method can be a helpful way to sort out your priorities. Using this method, you look at each of your ideas and give them a score from one to five in these categories:
- Impact – What level of impact will this investment have on your business? (1 for low impact 5 for high)
- Confidence – Based on research and consultation with experts, how confident are you that this investment will yield positive results? (1 for low confidence 5 for high)
- Effort – What level of resources are necessary to achieve this goal? How much time and money will be needed? (1 for high cost 5 for low cost)
When you have assigned a value to each number, multiply them together to get an ICE score. The higher the ICE score, the more viable the idea is as an area for investment. Even if you don’t use a structured method like ICE, it is crucial to find a uniform way of performing a cost/benefit analysis on any potential investments. Always try to prioritise investments that are low cost/high benefit.
Step Three: Research and analyse your competitor and industry activity
Another way to determine where to invest your money is to keep an eye on your competitors. What are other businesses in your industry doing? While you shouldn’t rely entirely on this, it can be a good indicator of where the market is at and whether it is the right time to prioritise growth or stability. Larger economic trends should also be taken into account as trying to expand when the market is in a downturn can be risky.
Step Four: Determine what other areas of my business you need to invest in (that don’t cost money)
Investing in your business is not always about spending money. Your time is a valuable resource that you should spend wisely when trying to grow your business. It is important to spend time working on things like company culture and accountability. Having a defined idea of what you want your company to be and working towards achieving that is a valuable use of time even if it can be challenging to quantify the impact.
The most important thing for the future growth of your business is to track the results of your investments of both time and money. These results will be vital when it is time to reassess your investment priorities in the future.
If you would like help prioritising which areas of your business to invest in, then call us today on 1300 ARABON to chat with one of our experienced accountants about the best options for you.