Investing as a Business Owner: What to Consider

Entrepreneurs tend to have a knack for taking calculated risks for the benefit of their venture. This risk-taking mindset can also be carried over to the investment world.

Running a business and investing in portfolios have plenty of overlaps. From capital accumulation to making your money work for you, it’s not difficult for entrepreneurs to make the transition to the investing realm, especially with prior business experience.

If you’re a business owner who’s considering jumpstarting your portfolio, you’re on the right page. We’ll give you a rundown of seven things you should consider to balance your business function and investment portfolio.

Let’s jump right in.

1. Align Business Goals with Investment Goals

Before stepping foot into the investment world, it’s important to have an assured source of income first. For entrepreneurs, this means having a consistent and predictable revenue stream.

Ensure that you have ample cash flow to keep your business running—check your financial statements and see whether your profits are all within optimal ranges. Furthermore, ensure that you have enough capital to pay your liabilities and monthly expenses without delay.

Don’t get into investing yet if you’re constantly teetering near the red zone with your business capital. It’s crucial that you have enough money to operate your business without compromising it financially—and that could mean making the call to put off making investments in the meantime.

That said, your investment approach wholly depends on your circumstances and goals. If you can assuredly grow your money through your business, then there are investment pathways that can definitely give your capital and cash flow a boost. 

Furthermore, it’s essential that you keep your financial goals aligned. Don’t let your investment goals distract you from your business goals, and vice versa. Be sure to know what to prioritise and keep at it. This way, your business and investments can simultaneously grow and flourish.

2. Keep Personal and Business Money Separate

Another important rule businesspeople should follow is to separate personal and business funds. 

Refrain from using business capital to fund your investment strategies, especially if such funds are meant for business expenses like wages and operational costs. This can force you to seek business loans or delay payments, which can compromise your ability to smoothly run your business.

One way to separate these funds is by opening a business banking account. This not only gives you a separate wallet to store business funds, but it also comes with exclusive banking features not commonly found in personal bank accounts. These features include multi-access and credit card payment features. 

Separating your funds also allows you to know how much money you should allocate for investing without dipping into the other fund. This allows you to maximise both money-growing avenues, making you more likely to succeed in both categories.

3. Diversify Your Investments

As a businessperson, you’re well aware of how crucial it is to have multiple sources of income, whether it’s multiple customers or multiple products, to grow your business. 

Spreading your resources across multiple channels allows you to maximise your revenue potential and also helps you remain agile in case sales numbers start to dip or customers move away.

The same core philosophy holds true in the investment world. Investing in just a single stock or bond limits you to the growth of that single investment. If it somehow starts dipping, you’ll be fully impacted by the loss.

One way to mitigate this loss is by diversifying. Instead of investing in just a single stock, invest in multiple ones across different industries. 

Consider investing in index funds and international stocks as well—investing on the ASX, for instance, can be a great way to get a share in the growing Australian market. You can take it a step further and invest in other investment channels as well, like cryptocurrencies, real estate, and bonds.

By diversifying your investment portfolio, you’ll mitigate the intensity of losses and grow your portfolio with more certainty over time. 

4. Understand Tax Implications

If you’re not careful, taxes can take a huge chunk of your earnings, both in the business world and the investing realm. As such, it’s important that you pay attention to your spending and tax allocation to ensure that you’re legally minimising your tax payments.

When investing, select the most tax-efficient approach to legally operate. This applies to mutual funds and stocks as well. From deferring your income to claiming tax breaks, there are many ways you can lower your tax payments as a business owner. You can also perform charity work as a way to mitigate taxes.

As a stock owner, optimise your stock allocation to reduce your annual tax spending and capital gains. Opting for managed funds like ETFs and municipal bonds is also ideal for lowering your taxes.

Before investing, be sure to consult with a financial professional to ensure you’re abiding by the law.

5. Reinvest Your Profits

It’s generally deemed a sound strategy to use the profit you have made from your business or investments to grow it. This way, you can accumulate capital and scale your operations in a sustainable manner.

In general, it’s important to be strategic with the money you have accumulated from your investments and businesses. You don’t want them to just sit around in a savings account accruing a measly interest rate. You want them to continue growing without much supervision—and that means putting them back into the right investment vehicles.

By reinvesting your profits, you’re making it easier for your future self to gain the funds to maintain continued prosperity in your life, both in business and personal terms. While it may mean tightening spending, the rewards you’ll reap from delaying gratification will more than account for it.

6. Hire a Competent Finance Professional

Every businessperson knows that they can’t be everything for everyone. They would need to delegate functions to other skilled professionals from time to time. 

For instance, unless you’re a trained and licensed accountant, you probably wouldn’t want to trust entirely in yourself to file your taxes. Even then, handling it yourself can be incredibly time-consuming.

For financial matters like stock investing, it’s a good idea to have a competent and skilled financial professional at your beck and call. These people will help ensure that your taxes are filed correctly and that you’re making the right financial calls for your financial well-being.

While hiring new staff will add to your expenses, they can save you more money in the long run with their knowledge of the best financial practices. Moreover, they can also give you peace of mind knowing that your finances are being closely monitored by competent individuals.

7. Research Thoroughly

If you want to maximise your odds of success in the investing world, then it’s important to familiarise yourself with the terms and trends surrounding the topic.

The first thing you have to do is know how to read stock charts. Familiarise yourself with indicators and chart patterns. You also have to know how to read financial statements to see if the company’s and stock’s underlying fundamentals are sound.

Of course, if you’re investing in another type of asset like real estate or a time deposit, then the aforementioned tips may not apply. But it’s essential that you cover some relevant topics about your chosen investment to ensure that you know where your money is going.

Furthermore, it’s key to know the ins and outs of the brokerage or investment firm you’re partnering up with. Review their reputation and terms and vet the one that’s the most accessible to you. Once you’ve made your choice, you can then start looking into their different stock offerings and make a decision from there.