Small business owners are cautious about every dollar spent and rightly so: Cash management is one of the key differentiators between businesses that succeed and those that don’t. That’s why return-on-investment (ROI) is an important concept that all small business owners should embrace.
With ROI, for every dollar you spend (your “investment”), you aim to get back a return that’s greater than your original investment. Sometimes, this is a direct, cash-for-cash return, such as generating two dollars in sales for every dollar invested in marketing. Other times, ROI results from time saved (or used elsewhere) that makes you more productive, thereby lowering your costs and increasing your profits.
In this article by our Business Advisory Services team, we’ll look at four things that we consider wise investments that will nearly always provide a positive ROI.
1. Accounting software
An accounting software system that ties into bank records and merchant services (like PayPal® or Stripe®) and that has good customer service, too, is a wise investment. QuickBooks®, FreshBooks® and Xero™ are popular, as is Wave®, a free service. Free programs can be great to get you started, but most advanced systems are also affordable and can be a better long-term investment—just be sure to purchase a system that’s easy to use and offers what you need.
An automated accounting system:
- Saves you back-office and administrative time (and time is money!)
- Can lower the cost of your accountant services
- Keeps accurate records, which can help inform your business strategy
2. Retain a CPA
As opposed to a tax preparer (who only prepares tax filings), Certified Public Accountants (CPAs) provide much more comprehensive insight and information that can help you build long-term profitability. A CPA that specializes in small-to-medium size businesses can help with:
- the financial reporting required for your type of legal entity (such as sole proprietor, LLC, Subchapter S)
- tax-planning strategies that save you money early on and for years down the line
- preparation of financial documents, especially if you plan to approach lenders or investors
- appropriate financing strategies
3. Professional development
Investing in your professional growth is also worth the money. Often, entrepreneurs bring specific expertise to their ventures, such as product knowledge, operations or sales.
Rarely, though, are entrepreneurs good at everything—and while there are many excellent, free resources available, sometimes particular challenges or schedules limit your ability to learn what you need to know. Organizations such as BusinessBlocks and MBA Central offer paid, online business courses and coaching that can help you grow as a business owner.
Consider how your knowledge or experience falls short or areas in which you’d like to learn more, and invest in any or all of these:
- Individualized coaching (particularly in financial management, if that’s a weakness)
- Group short-term seminars or workshops, either in your field or a specific area for development
- Enrollment in a high-quality, comprehensive program, with cohorts of business owners to create a supportive learning environment
4. Retain a lawyer
While most small businesses don’t need to retain legal services, small business owners should consult with an attorney early on to discuss issues such as your legal entity, liabilities and other matters. If your business involves complex issues or if you offer products and services that carry higher liability, you may benefit from retaining a lawyer. Attorneys specialize in a range of business practices and industries, and professional advisement now can save you enormous expense and stress later.
To find the right attorney for your small business:
- Get recommendations for your type of business or industry from colleagues or competitors
- Read online reviews and check references
- Look for practices that specialize in your industry
Go for the ROI:
While some business expenses provide immediate benefits, the ROI for expenses like those listed here are less obvious at first but can provide excellent returns over the long term. Work these into your business plan and you’ll enjoy a healthy ROI for years to come.
