“Don’t tell me where your priorities are. Show me where you spend your money and I’ll tell you what they are.” James W. Frick (VP at the University of Notre Dame).
Business is booming. At least that’s the consensus on Wall Street. What does this mean for small businesses on Main Street? For many companies, it means having more money to spend. If the tax cuts that are now in effect as well as improved consumer confidence have put more money in your hands, here are some ideas about how to spend it.
Hire new employees
“You don’t build a business. You build people, and people build your business.” Zig Ziglar.
If your sales have been growing and you want to take your business to the next level, you need more help. Your choices: hire employees or engage independent contractors. Employees cost more because of payroll taxes and benefits, but bring things to the company that can’t be had with independent contractors: longevity, loyalty, opportunities for promotion, and in some cases, special tax breaks (e.g., tax credits for hiring workers from targeted groups, paying for health coverage, and paying wages while on family or medical leave).
Even if you don’t need additional employees, you can use cash to help your current staff:
- Raise salaries and wages
- Give bonuses
- Extend personal leave time (PLT) with pay (e.g., longer vacations, personal days, sick days)
- Add/increase 401(k) matching
- Support training and education
Buy needed equipment
“The mechanic that would perfect his work must first sharpen his tools.” Confucius
Technology and other up-to-date tools can help you work efficiently, leading to greater profitability. Consider replacing older equipment that may be slowing you down. Look into the use of AI and software solutions that you can now use in your business. Remember that under current tax rules, you’ll likely be able to write off your entire cost , even if you fully or partially finance the purchases.
Save for a rainy day
“A simple fact that is hard to learn is that the time to save money is when you have some.” Joe Moore (TV personality)
As a small business owner, you need to save for your business needs as well as your personal retirement. With interest rates on the rise (albeit slightly), the cost of borrowing in the near future likely will be higher. If you can stash cash now, you can use your own funds for growth or other purposes and minimize or avoid the need for commercial borrowing.
On a personal front, you should be maximizing tax-advantaged retirement savings in 401(k)s or other qualified retirement plans. Doing so gives you a current tax break and the ability to build up tax-deferred income (or tax-free income depending on the retirement plan), as well as a penalty for tapping tap funds too early, which are sound incentives for this type of savings. Don’t rely on the sale of your business to provide you with a financially-secure retirement because you just never know….
You may have other ideas about how to spend your money now. Be sure to work with your CPA or other financial advisor to determine the possible tax implications and what it means to your bottom line.