Good news for the coming year: According to The Principal Financial Well-Being IndexSM: Business Owners, small business owners are feeling more optimistic than they have in three years. More than half (53 percent) of business owners say their company’s financials have improved compared to last year; about the same number predict their business financials will improve in the coming year; and almost nine in 10 (88 percent) say the financial health of their businesses are either stable or improving.
There’s good reason for the optimism: Almost three-fourths (71 percent) of small business owners polled say they have surplus business capital on hand. That’s up from 62 percent last year.
Where are small business owners planning to reinvest this extra capital? Almost half (46 percent) will put it into their businesses, with 37 percent making purchases to improve their companies’ technology and 36 percent taking steps to protect their businesses from loss.
Putting money back into your business is a smart move, but don’t limit yourself to equipment, insurance and facilities. Here are some other places to invest.
Invest in Your Employees
You wouldn’t have your business without your employees, so investing in them is important, too. Last year, 41 percent of business owners hired new staff, citing customer demand, high volume of business and confidence in future growth as their top reasons for doing so. In the next 12 months, the same percentage will hire full-time employees.
Existing employees deserve an investment in their happiness, of course. Forty-three percent of business owners say retaining talented employees is a challenge for them. To help improve loyalty, 33 percent offer competitive benefits packages, and in the next 12 months, 33 percent of entrepreneurs plan to add more employee benefits, up from 16 percent last year.
Invest in Yourself
Last, but not least, don’t forget to invest in yourself. Too often, business owners support the business by taking money out of their own salaries (or not taking a salary at all). Not only can this cause family strife and leave you without adequate retirement resources, it can also be a sign of a poor business model. This year, 75 percent of business owners say their personal finances and household finances are healthy—up 4 percentage points from last year. That’s really good news.
Investing in yourself has a psychological component as well. I’m happy to see that 48 percent of small business owners report either taking vacation time or using technology to work anywhere they want. In addition, 43 percent regularly make time for exercise, and 39 percent have enough staff so that they can leave work without worrying.