For many new and growing enterprises, cash is king. Businesses at an early stage of development may need funds to make capital purchases, to support what may be an unstable cash flow, or to keep a new enterprise afloat long enough to take off or gain traction in the marketplace. Because of this, many start-ups or new enterprises don’t consider developing an investment strategy.
That can be a mistake, and although liquidity may be a priority, a sound investment strategy can support businesses even in early stages of development. With just a small cash surplus, a properly managed investment strategy can help your business demonstrate responsible cash management capabilities. This can make it more attractive for sources of external funding, whether they are lenders or investors, and give it a leg up in the marketplace.
As a growing business, your top investment priorities will likely be short- or medium-term. These may include purchasing assets that are directly connected to your business growth – such as machinery, equipment or property – or perhaps you want to build a “war chest,” a reserve of cash that can be used for a possible acquisition in the medium to longer-term.
Even if cash-on-hand is a priority, an investment strategy can be beneficial for growing businesses for several reasons. A strategy can help you map your likely future financial position and thereby assist in the development of your business plan. Also, even over short periods, there may be investment vehicles that can more productively grow your cash.
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