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If you're investing in yourself this year, you should take a minute to think about what that means for your taxes. Don't fret, this is the good kind of tax post. Early bird catches the IRS worm, after all.
And with tax season just around the corner, it's never too soon to give pause on how you're going to spend a refund. While everyone will tell you that year one of being a small business owner is the hardest, during tax season, there are multiple credits you can take.
If you’re in the position to get refund from the IRS, the best decision you can make as a business owner is to put that money to work.
Here is how to reinvest your tax refund. Use these six ways to make sure that year two is golden (or at least in the green).
You’re only as good as your team.
You hear this again and again because the numbers do not lie. It costs you time and money to employ workers who do not work at optimum capacity. According to a study conducted by ADP, engaged employees are 57% more effective and 80% less likely to leave your company. Employee turnover or a disengaged employee can cost you $2,246 per year. To power your bottom line you need to make sure your team is happy and appropriately paid. It might be hard to see the payout to pay your employees more, but it is a long term investment.
The goal shouldn’t be expansion (unless you really do need to add to your team), but reinforcing the team from within.
Know When You Need to Delegate and Let Those Reigns Go
If your tax refund gives you the flexibility to outsource tasks that are eating away at your time, it might be the right time to consider doing so. For instance, if as a business owner you’re attempting to cut corners for the sake of funds, but you’re wasting time in the office sorting, organizing, answering customer support emails, or you’re losing hours in QuickBooks, figure out what you’re costing yourself.
An easy way to do this is decide what (if you were profitable) would you be paying yourself. If paying someone else is cheaper hourly than what you are worth, you’re losing money. Delegate and open up your schedule to focus on other parts of the business that only you can handle.
You’re a valuable asset to yourself, don’t diminish that by refusing to hire or delegate.
If You're Doing It Good, Tech Will Help You Do It Better
Are you a small business without a website? Do you need to update your photography equipment? Investing in foundational elements of your business is key and will take you to the next level.
Beyond the basics, there is life-changing tech for every business. The primary reason most new small businesses fail in the first two years is generally attributed to a lack of marketing savvy.
Companies that make it past the two year mark have found a way to streamline marketing and social media experience- it’s nearly impossible to engage customers without them. And for a time-strapped new business owner
Investing in the right automated marketing tools is one of the best decisions you can make. Research the different options that best fit your business.
Simply Measured, Keyhole, and Sprout Social are three great options worth looking into. There are multiple plans that offer everything from brand monitoring to reporting tools. This tech will also help you analyze where you’re performing best, so you can direct attention into areas that make the most sense to make that money.
Pay Off Business Debt
If you’re racking up points on that AMEX, you might be tempted to take a vacation, but what you should do is pay off your bill. When you pay off your credit cards you are basically making at 13 to 20% ROI, depending on your APR.
Become a Lean, Green, Tax Rebate Machine
If you have the ability to install solar panel, you can lower your future tax bill. The government offers tax incentives for businesses that invest in green technologies.
Businesses can deduct 30% of their solar install cost on their federal taxes. Not a bad break for giving Mother Nature one.
Don’t Be a Drip, Invest in One
One of the secrets of wealthy people is that they don't expect to make all their money in one place. They have multiple investments that bring them cash. If all of your 2018 ducks are in a row, you might consider an investment as a way to double down on your financial security.
A dividend reinvestment plan (DRIP) allows individuals to buy shares directly from a company and to reinvest dividends from those shares automatically. It’s a plan that takes advantage of the power of compounding. Simply put, compounding is the process of earning dividends on reinvested dividends.
With a DRIP, instead of receiving cash from a declared dividend, participating investors receive shares and fractional shares of company stock of equivalent value.
It’s sort of the magic wand in finance, because it is one of the easiest ways to build wealth with a small amount of effort. Check out what DRIPs might deserve your investment dollars here.
This post was originally published on April 5, 2018, and has since been updated.
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