It may not happen often, but getting a tax refund from Uncle Sam is one of the best feelings in the world. With a little extra cash in your pocket, you can finally:
- Take that dream vacation you’ve always wanted
- Treat yourself to some fine dining and cuisine
- Splurge on the latest gadgets or fashion accessories
In fact, this is precisely what many small business owners do with their tax refunds. Wanting to pamper yourself is perfectly natural. That’s part of the point of running a business.
If you had even more money in the future, you could:
- Take better vacations
- Eat more delicious food
- Buy cooler gadgets
This is why savvy entrepreneurs choose to invest their tax refunds. If your business is the proverbial goose that lays the golden egg, then giving that goose better food will ultimately yield larger and more abundant eggs in the future.
What exactly should you do with that money? Below are six investment tips that can help you turn your next tax refund into long-term dividends.
1. Pay Any Outstanding Debt
It’s really hard to build a thriving business without taking on debt. This is as true for smaller players as it is for multinationals. Sometimes you need extra liquidity to cover short-term expenses or make long-term investments.
But debt is expensive.
Even if you have an amazing interest rate, you’re still losing money every month that you shouldn’t. The sooner you pay off that balance, the sooner you can keep more of every dollar that comes into your business.
If you receive a tax refund this year, use it to pay whatever debts you have, starting with whichever loan has the highest interest rate.
2. Improve Your Products and Services
You may not have a huge research and development budget, but there are always opportunities to improve the products and services you sell. Even if you run a corner convenience store that sells nothing but trinkets, you can update your inventory with the latest and greatest.
With better offerings, you can attract more customers and generate more sales.
3. Expand Your Online Presence
Consider these mind-blowing statistics:
- There are roughly 8 billion people online globally. That’s nearly half of the planet.
- Google processes approximately 2 trillion searches annually — and that’s just one search engine.
- In 2017, e-commerce sales reached $2.3 trillion. By 2021, that number is expected to exceed $4.5 trillion.
What these numbers illustrate is that more and more people are spending their lives online. If you want to increase sales, you need to be online as well — waiting for them.
- If you don’t have a website, now is the time to get one.
- If you have a website, use that extra money to improve it (with these tips).
- If your website is perfect, you should bulk up your social media presence.
But what if you lack the technical expertise or social media know-how to pull this off? Check out the next tip.
4. Hire More Professional Help
Having more hands on deck can make your overall operations far more productive, but it doesn’t always make sense to bring on full-time staff — with salaries, benefits and a whole host of tax considerations.
Fortunately, you don’t have to hire full-time help. In today’s sharing economy, you can hire virtual assistants, freelancers and other part-time contractors to help you tackle any lingering short-term projects on your list.
This approach allows you to fill in whatever technical gaps you might have. It also frees you to focus on more profitable aspects of your business, such as improving your products and services (see tip #2).
5. Get Your Learn On
Your tax refund probably won’t be enough to cover Wharton Business School. However, there are plenty of more affordable ways to improve your entrepreneurial chops. Community colleges are a great option. With the rise of online learning, you can master any number of professional skills — from marketing to programming to accounting.
Udemy, Coursera, and Skillshare are some of the more popular of these massive open online courses (MOOCs). For a more extensive selection, check out MOOC List.
6. Donate to a Worthy Cause
Donating to charities may seem counterintuitive. After all, you’re not bringing in money — you’re literally giving it away. Nonetheless, the long-term benefits of this approach can be worth it — especially if you donate to a local cause.
In addition to the fuzzy feelings you’ll get, supporting a community charity can help generate goodwill. This is great for PR. And it can help raise awareness of your offerings.
Don’t forget: Charitable contributions are tax-deductible.
What Are You Going to Do With Your Tax Refund?
Refunds don’t come along very often, and it’s tempting to splurge a little bit when they do. Who doesn’t want to be king for a day? But if you invest your tax refund the right way, you get the castle and the kingdom for life.