Capital investments enable businesses to manage growth, expand their offerings and cater to a broader base of customers. The term capital investment is typically used to describe fixed assets like land, machinery or facilities that don’t fall under regular day-to-day operating expenses.
Capital investments have the potential to increase profits, improve product or service quality and streamline business processes. Business owners need to familiarize themselves with how to maximize the benefits from capital investments.
Below we explain why capital investments are important, and what you should be thinking about for your next big purchase.
Why are capital investments so important?
Fixed assets contribute to the generation of revenue for your business. If you purchase a warehouse to store goods, you’ve increased your ability to expand your inventory, allowing you to fulfill more orders and generate more profits.
Capital investments can also be sold when needed for quick cash flow. Selling capital investments can help businesses stay operational while they make the adjustments necessary to account for any sudden changes in the market.
Types of capital investments
There are several capital investments that you should consider this year to improve the growth and success of your business:
- Equipment purchases: Equipment purchases are common capital investments. Whether you want to invest in a new forklift for order fulfillment or manufacturing equipment to increase the capacity of your production line, equipment purchases can help you keep up with business growth and manage the demands of your expanding customer base.
- Leases or rentals: If you aren’t ready to purchase new equipment, leases and rentals are affordable options offering the flexibility that many business owners need during transitional growth. Capital investments in leases or rentals offer business owners many of the same benefits of equipment purchases with lower immediate costs.
- Inventory growth: One of the most important expenses for businesses to invest in as they grow is inventory growth. Adding to inventory enables businesses to readily fulfill new orders and ship products to customers with a short turnaround time.
- Facility expansion: If your current facility does not have enough space to accommodate your growing business, a capital investment in facility expansion might be in order. Investing in a new facility or an expansion of your existing facilities gives you the room that you need to keep up with all the changes that might be affecting your business.
- Technology: Computers, cell phones, computer hardware and certain types of computer software are all capital investments that can affect the efficiency of business operations, quality of customer service and security of your sensitive information. Investing in new technology allows you to connect with your customers more reliably, which can streamline many of your business processes, including ordering, fulfillment, inventory tracking and customer communications.
Regardless of your particular business needs, it’s important to have access to working capital to help fund capital investment purchasing. Working capital is available in many forms, one of the fastest being a 401(k) Rollover, also known as Self-Directed 401(k) or ROBS (Rollover as Business Startup). The terms ROBS can be confusing because it references “Startup” in the name, but ROBS Funding can be used for any business expense. Give Tenet Financial Group a call to discuss your business’ funding needs: (888) 901-3335, Option 9.