Should You Reinvest in Your Business?

Everyone can pretty much agree that now may not be the best time to start a business.  With the economy circling the drain (or getting washed out to sea), lenders clutching the purse strings tight, and businesses going under at every turn, it’s a little scary to even think about quitting your day job and going to work for yourself.  But if you are already running a small business you may find yourself in even more dire straits; and with a much more difficult decision on your hands.  If your business is failing due to the recession (or other factors), should you try to reinvest in it or simply let it go?  Here are just a few things you may want to consider before pulling the trigger.

For starters, it doesn’t look like the recession will end any time soon.  You need to think about the influx of cash required to keep you afloat not only in the short term, but over the next few years if the economy continues to fail.  You should look at how far in the red you are currently, consider the amount you may be able to get out of the bank, and then weigh the pros and cons of continuing on your current trajectory.  If you think it’s possible to hold out until the economy gets back on its feet (even if that’s a few years away), then it may be worth taking on the additional debt.  But if the burden is only likely to result in outright failure (bankruptcy), then perhaps you should simply cut your losses now and pull the plug.

However, you should also take into account what an infusion of cash could mean at this stage of your business plan.  Perhaps reinvesting in your business means taking it to the next level.  If you run an operation that is doing relatively well financially but you have simply become stagnant with your small store or limited local clientele, then it may be time to look into investments that will help you to expand into other markets.  Once you’ve proven that your product or service has potential, you can attract the interest of not only traditional lenders (banks), but also angel investors or even venture capital firms.  This could provide you with the money you need to revitalize your company and engineer the expansion that will lead you to future success.

It is never easy to put more money into your business, especially during a recession.  Not only is the decision a hard one, but the inception might be even more difficult.  Whether you’re selling diamonds, taking tour groups scuba diving, offering online printing services, or catering weddings and other events, you need to consider not only the viability of your business (money owed, income, and of course, the current market) but also the amount of money and time that would need to go into keeping your company afloat or working towards expansion.  Once you have thought it through the decision should become clear.

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