For the last couple of years, corporate America seems to have been playing it safe when it comes to growth. Currently U.S. corporations are holding on to a record $1.65 trillion in cash.
Are you in a similar position, perhaps? Cash may not be your “security” blanket but you may be unwilling to take the risks needed for growth.
Based on my daily interaction with midmarket companies, I would advise you to be proactive about your business growth. Failing to do so allows your competitors and the market to control your future. What good is cash if you don’t use it to grow your business?
Fortunately, it seems that some U.S. businesses are getting off the sidelines and putting their money to use. Many are investing in mergers and acquisitions, according to a report by the Association for Financial Professionals. In fact, this is the first year-over-year decline in cash reserves since 2011.
This trend reflects a growing confidence in the U.S. economy and it also demonstrates a profitable way to use cash rather than just letting it sit around.
But what about your company? Are you “playing it safe”? It’s not too late to take a proactive, strategic approach to growth. Here are four suggestions for putting your money to work rather than hoarding it:
- Mergers and Acquisitions – Use M&A to grow quickly. Add a new customer base, enter a new market, or gain a new technology or capability. The core benefit of acquisition is that you have a ready-made solution you can use on day one, without building it yourself.
- Stock Buybacks – Public companies will use excess cash to repurchase their own shares if they believe the price is undervalued. While stock buybacks don’t create any real growth for the company, they increase the earnings per share and can be a tax-efficient way to distribute earnings to investors.
- Research and Development – For some, organic growth is a better pathway than M&A. Invest in the future: What will your customers want in a year from now and in 10 years? Use your money to develop new products and services. See how you can be best positioned for future growth.
- Plant and Equipment Upgrades – Updating your physical assets can help you become more efficient, reduce costs, improve your services, and prepare for future growth. For example, upgrading plant equipment might improve safety and reduce down-time caused by accidents. Upgrading your software might allow you to process more orders per employee and build for scale.
Whatever course of action you decide to take, don’t sit on the sidelines or cling to a false sense of security. If you’re not growing you’re dying.