Where Are You Investing: Employees or Equipment?

Posted by on June 16, 2011 in Business Management [ 0 Comments ]

The small business landscape for many business owners is uncertain at best. Last week the NFIB’s Small Business Optimism Index dropped by .3 points to 90.9. As new government policies are affecting businesses in different ways, it seems no SMBs are completely adamant about investing in the future.

“Corporate profits may be at a record high, but businesses on Main Street are still scraping by. Washington is throwing misdirected policies at the problem, offering tax breaks for hiring and equipment investment, but acting surprised when they don’t bear any fruit,” said NFIB chief economist Bill Dunkelberg. If your small business is still profitable, are you saving for the future or investing in resources to grow now?

It may be a good idea to take advantage of the current economic landscape. Investing in growth resources now, gives your business less competition, and could potentially bear more “low hanging fruit.” According to AMI Partners, U.S. SMBs with fewer than 100 employees are expected to spend $36 billion on marketing in 2012, up 4 percent from 2011. Staying ahead of the curve and investing in business development resources keeps you poised for exponential growth in the coming years; but where to invest? Do you invest in employees? Or are equipment purchases a safer ROI?

It seems a mix of both could be beneficial for businesses, but equipment and static resources have gained more clout with business owners as of late. The New York Times reported that, “since the recovery began, businesses’ spending on employees has grown 2 percent as equipment and software spending has swelled 26 percent. A capital rebound that sharp and a labor rebound that slow have been recorded only once before — after the 1982 recession.”

Does investing resources with a high immediate ROI, like document management software and VoIP phone systems make more sense? For many business owners it seems the internal hassles of hiring new employees may be a barrier in itself. According to CrowdSpring, “Every time you hire a new employee there is a huge amount of work to be done: writing the job description, posting the job, reading the resumes, making the calls, interviewing the candidates (often multiple rounds), meeting to discuss the candidates, and then, when you’ve finally made the offer and it’s been accepted actually getting the person through the HR process.”

Although ramping up your office equipment makes more ROI sense in the short term, investing in people will often turn out to be your most valuable asset. Employees provide benefits not related to money. New employees can alleviate burdens from existing employees and raise morale. Although labor costs, have risen 6.7 percent, according to the Labor Department, and health benefits are becoming more complicated; your business should think about investing in both new equipment and new employees now, instead of tomorrow.

Image Credit: Open Forum

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