One of the ways some entrepreneurs grow their business is by reinvesting a significant portion of their profits in the product or service that is bringing in the most revenue. That can be done by allocating capital for technological innovations that will ensure the continuous manufacture or operation of that top-performing product or service. How big their investment is depends on the situation—for instance, maybe cybersecurity is a top priority, so a monthly allowance for a virtual private network client is a must. Another is supporting their marketing team’s campaigns by increasing the budget for promotions.
While these actions have a direct effect on their bottom line, it also involves dipping into business earnings. What if there is another way of growing your company without spending money?
Build wealth passively
While most revenue-generating means involve active participation on the part of the entrepreneur, there are also some passive channels worth looking into. One of them is making an investment in stocks and bonds, which can be a good passive income source for a business.
Of course, this type of asset-building is not for all. You must consider a few factors:
- You have a business that is able sustain its profits over a long period,
- You have specific company objectives that need a lot of time and money to achieve,
- You have cultivated a high tolerance for risk, and
- You have the capacity to build a diversified portfolio.
Look into value investing
Map out a strategy before you start buying common stocks. Since you want to build wealth passively, you may not be interested in trading or the regular buying and selling of shares for now. Instead, value investing may hold the key to increasing assets outside of your business operations.
According to Benjamin Graham, the father of value investing, “The real money in investing will have to be made – as most of it has been in the past – not out of buying and selling, but out of owning and holding securities, receiving interest and dividends, and benefiting from their long-term increase in value.”
The valuation-based approach requires you to think about the long-term consequences of your purchase. You may make mistakes along the way, such as selling too early or buying from a corporation that goes bankrupt – but it is more important to develop your proficiency in the sectors you want to focus on. Once you do it right, your company can reap rewards that can span generations.
Consider Bitcoin or cryptocurrency investing
“Cryptocurrencies can no longer be written off as a curiosity,” says Frank Holmes, an expert in royalty companies. More people and businesses are looking at the potential of Bitcoins and other cryptocurrencies to increase in value. According to a Blockchain Capital poll, more than 25% of millennials, the largest generation in the United States today, prefer Bitcoins over stocks. Meanwhile, more than a third prefer Bitcoins over bonds.
The figures may be a good indicator for you to bet some of your money on blockchain technology. Soon enough, savvy millennials will become the highest earners in the country. This event will possibly enlarge the blockchain network, which will then expand its value.
The financial sector has also been seeing major disruptions, first through the proliferation of global payment solutions like PayPal. The entire financial system is not far from experiencing another big change. When that happens, you want your company to be the first in line in reaping profits.
Making informed decisions
Planning and preparation are important steps in deciding to invest some of your profits in stocks, bonds, and cryptocurrency. Like you would in lead scoring to determine which client segments will give you the highest ROI, rate and align your passive investment options with your company’s priorities.
If possible, hire a financial manager to help you sort out the technicalities. Consult your cofounders and fellow executives. If you are running a family-owned enterprise, enlist other members, especially your spouse, parents, or siblings. Too, there is no rule against self-study. It would be beneficial to continuously seek out knowledge and insights from existing literature about the different types of investment before you take the plunge.
DISCLAIMER: This article expresses my own ideas and opinions. Any information I have shared are from sources that I believe to be reliable and accurate. I did not receive any financial compensation in writing this post, nor do I own any shares in any company I’ve mentioned. I encourage any reader to do their own diligent research first before making any investment decisions.
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