After the First Round of Funding: Where to Put the Money?
As a business, one of the most important decisions to make is where to allocate cash in the most efficient way possible in order to produce the best financial results. When a company receives a first round of funding there are many different areas of a business that could use extra cash. It is important for a business to think long term and at a high level when deciding exactly where to invest the money.
Where should your company spend their first round of funding?
Many times, new businesses mistakenly go out and think that a round of investment funding is free money that can be spent in any way possible. However, in reality nothing could be further from the truth. Whenever a business receives funding from another person or investor, they have an obligation to earn the highest return possible.
Product Innovation
Businesses that are at the stage where they will receive funding from investors usually have a product or service that can serve customers in a way that is profitable for the company. However, it is important that a business is not complacent and continues to innovate on the product front to continue to meet the needs in the market place. Innovating on products that are already being sold can be tricky, but is crucial in order to continue to bring in customers.
Infrastructure
In addition to product innovation, investing in business infrastructure is crucial towards the long term success of a business. In the early stages of a start up business, there are many long term investments that are put off in order to get a product to market quickly. If a business is going to continue its growth over the long run, there must be adequate infrastructure in order to sustain the growth that they will have. If a business can not scale adequately, there is no hope to
continue growing in the market place or with their customer base. Investing wisely in infrastructure will ensure that a business has the proper inventory, support staff, and other essentials in order to continue its growth trajectory.
Cash Management
Overall, cash management is one of the most important aspects of running a business. There are many businesses that fail because they do not understand how to properly manage and invest their cash in to things that will continue to generate cash for the company and for the investors that put their money in to the business.
Jonah Engler is a successful businessman and entrepreneur from New York City.