Business is more than just the idea of buying and selling. It is also about how you manage to sell and make an investment from the business. As a business owner it is important to figure out the secrets of business finance.
You have probably heard of a number of business finance ideas but have had your reservations if they actually work. Well, the secrets do work and have worked for a number of professionals in the sector.
Read on to find out about three business finance ideas that are recommended by professionals. Information on the professionals who termed these ideas as “secrets” can also be found here!
Power of Compounding
One of the ideas that is quite easy to practice even in your business life is compounding. For example, you save around 10% of your monthly earnings, from the time you were 18, for monthly interest. How much would you be worth when you’re around 65 years or more?
This is one of the easiest mathematical ideas that almost anyone can take into account. If you’re into business, it’s even better when you compound with your earnings. In fact, when it comes to business earnings, you won’t be looking just at banks for this purpose, at least not from a saving perspective.
According to John Pelletier, Director of Financial Literacy at Champlain College, what you’ll be looking at are bonds and stocks. This will enable you to diversify your portfolio giving you, and in most cases, give you a rate of around 7% interest at least.
The idea is also based on starting early as making the same savings when you’re in your 30s doesn’t mean much as the time you’ll need to compound is gone already.
Risk Tolerance Investment
Another business finance tip that you should actually look at is building your investment on risk tolerance – appropriately. This is one aspect that Gregg Schwartz considers a secret that every business should be looking to build on. Schwartz is the Sales Director at Strategic Sales and Marketing.
This is where you have to separate your eggs – and not put them in one basket. You do this by investing in different ideas – or stocks – so as to not lose it all in case your hunch on the investment wasn’t correct. When you invest in more options, they’ll work together to reduce your risk.
This is especially useful when you’re looking to invest in stocks as they are generally more volatile than bonds. By spreading your investment it means that they should work together to spread the volatility.
Loss of Purchasing Power
One aspect of business that you have to be comfortable with is that prices tend to go up every now and then. And this comes with a risk that you obviously need to know about in business, according to Robert Glovsky, Chairperson of the Colony Group in Boston.
For example, if you buy a crate of soda at around $10, and after a few years inflation runs to 2%, how much will that same crate cost in 10 years? The crate will go up by around 20% more, on the original price.
What happens next? One of two things will happen, and this is a general consensus on everything you buy – prices will increase or you’ll buy less. There’s no running away from inflation as a business person.
When it comes to business finance, there are many tips that you need to know to make the best out of your business. Here are the few basic secrets that you need to learn about business finance to get a better understanding in the field and ensure that your business survives long term.