The entrepreneurial life is full of ups and downs. As you take risks, you’ll likely see your income drop at one moment and spike the next.
If you’re successful, though, over time you should start to have more cash on hand. When that happens, you want to have a solid plan regarding what to do with your hard-earned income. Of course, some of that cash will cover your lifestyle. You can even take that vacation you’ve been hoping to go on for all these years.
But once you have money in hand, you also want to consider ways that you can put it to work to help you earn more money. Here are a few suggestions for ways that entrepreneurs can invest their profits wisely.
1. Create a Foundation for the Future
Before you hunt down the latest cryptocurrency or invest in a piece of real estate, it’s important to consider if you have a solid foundation for the future. As a self-employed individual, you don’t have a corporation providing a retirement option or matching contributions. You have to take care of that yourself.
The good news is that it isn’t difficult for entrepreneurs to set up their own retirement plan — even if they have limited resources. Thanks to technology and third-party providers, you can create an IRA or solo 401(k) that can meet whatever level of options and flexibility you feel will help you create a healthy financial nest egg.
2. Become an Angel Investor
As an entrepreneur, you know what it takes to create a business. You also know how hard it can be to foot the bill, even when you have a rock-solid business plan and plenty of drive and motivation.
With that in mind, consider pouring some of your income into others with similar dreams and aspirations. Angel investors (also known as seed investors) are often the difference between whether or not a business idea ever becomes a reality. By putting your cash behind other entrepreneurs that you trust, you can enable them …and reap some of the rewards of their labor, too.
3. Start Another Business
Of course, if you’re considering angel investing, you may also be willing to put your money behind another business: your own. If you’re an entrepreneur with money to spend, you’ve already figured out how to get a business off the ground. In fact, you’re so successful, you have excess profits that you’re looking to reinvest.
When that’s the case, you may want to consider turning yet another business dream into a bonafide reality. Remember, you won’t have to go through all of the same struggles you went through when you started your first business. This time, you’ll have experience on your side.
Plus, you won’t have to worry about financial pressures like paying back loans or interest payments. You won’t even have to deal with the need to satisfy your investors because, well, that’s you.
4. Invest In Your Existing Business
If launching a startup from scratch isn’t the best idea, there’s another option. Invest in the business that you already have. Sure, it’s successful enough to leave you with extra money to spend. But even with the most profitable businesses, there’s always room for improvement.
Consider your current business operations and look for areas where you can improve things. This could take many different forms. You might provide the capital to develop a new product or service. You could also invest in better training for your staff or help them with ongoing professional development to improve loyalty, productivity, and retention rates.
The good news is that you aren’t investing in your business to save it. You’re augmenting existing success. This is always a great place to work from. It can provide excellent opportunities to invest your money, too.
5. Pour Into People and Causes
Finally, consider investing your money into people and causes that need it. Yes, we’re talking about supporting less fortunate people and non-profits seeking to make a difference.
The first and most important thing that this does is use your money for maximum impact in the communities that you care about. But it goes further than that.
By supporting good causes, you can also enhance your own personal brand. It helps establish your reputation and sets you up as a business owner who cares about more than just the bottom line.
A Word of Warning
Before we go, it’s worth including a quick word of warning. All of these ideas may sound good in theory, but that doesn’t mean they’ll automatically work for you. You might invest in a brilliant business idea, and then watch it get bungled in execution.
With that said, keep two things in mind as you look for ways to invest:
- First, keep your own situation in mind. Make sure you’re choosing investments that you feel confident about, and always invest money that you can afford to lose.
- Second, brace for failure. As an entrepreneur, you know that failure is just part of the path to success. If an investment doesn’t work, try something else. Just make sure to spread your assets out so that you don’t lose everything on one gigantic, risky bet.
If you’re a business owner with extra cash on hand, you know that it can be doing more good than burning a hole in your pocket or, even worse, sitting doing nothing. Instead, employ your money. Put it to work by investing it in the name of building an even brighter future for both yourself and those around you.
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