Looking to get more bang for your buck?
Let’s face it. Every small business owner wants to make investments that pay off big. Capital improvements lead to better operational efficiency and higher revenue…eventually.
Here’s the issue…
Not all capital improvements are created equal. Some investments turn into game changers. While others barely dent the bottom line.
With 44% of small businesses planning to increase investment in the coming year, it’s more important than ever to know where to direct your funds.
This article breaks down the highest ROI capital improvements for small businesses step by step.
Ready to dive in?
Table of Contents
Why Capital Improvements are Important For Small Businesses
Capital improvements are investments made to the long-term physical assets of a business. These upgrades can include machinery, equipment, technology, furniture, facility renovations and more.
You might be wondering…
Why are capital improvements important?
Put simply; capital improvements improve efficiency and increase business value. A smart upgrade can lower operating costs while boosting productivity.
Furthermore, capital improvements stand apart from daily operational expenses. That money spent on improvements won’t swing when your business has a slow month. And that money goes toward making your business more profitable.
Bottom line.
38% of startups fail because they run out of cash or can’t secure additional funding. Everything you spend needs to have as big of an impact as possible. Capital improvements with a high return on investment allow you to extend your budget, while building your business for long-term success.
What Capital Improvements Have The Highest ROI?
Not sure where to begin? These capital improvements have been proven again and again to provide the biggest ROI for small businesses.
Technology & Automation
If you had to guess…
You’d probably guess this one first. And for good reason.
Technology and automation improvements are some of the quickest ways to decrease expenses and increase production.
This can include; new POS systems, implementing inventory management software, and automating repetitive tasks. There are countless tools out there that can revolutionise the way you do business.
Revenue grows and businesses expand quicker when digital tools are leveraged. Best of all, prices for small business technologies are more affordable than ever.
Warehouse Vertical Space Optimization
Alright, quiz time. What’s this capital improvement that businesses overlook…
Grab your pencil and write it down.
Warehouse Vertical Space Optimization
The average warehouse only utilises around 50% of their storage capacity. That means half of your warehouse’s space goes untapped. Literally. Above the traditional warehouse racks.
Of course you could always rent a bigger space or invest into a storage building extension. But why spend thousands more when you can look at what’s above your head?
Warehouse mezzanines allow businesses to gain up to an additional 50% of usable floor space. By installing a secondary level to your warehouse, you can open up floor space for more inventory. Mezzanine floor storage can also be used for employee break rooms or admin space.
But wait, there’s more…
Warehouse vertical space can also be optimised by extending your storage racks upwards. Add shelves above your conveyor belt. Implement automated storage and retrieval systems. Everything is about going vertical these days!
Taking advantage of unused vertical space allows you to maximise what you currently have. It’s one of the most affordable improvements you can make that will increase capacity.
Why spend money on more warehouse space when you can use what you already own? Warehouse vertical space optimisation is one of the best capital investments you can make as a small business.
Energy Efficiency Improvements
Want to reduce operating costs without actually changing your business processes? Improve your energy efficiency.
Energy efficiency improvements are another capital investment that offers one of the highest returns. By changing your lighting to LEDs, upgrading old HVAC units and insulating your business, you can cut down on monthly expenses.
Heads up.
These investments may not seem like the most exciting. But every little bit helps and they will add up over time. Not to mention, energy efficiency improvements often come with tax incentives.
Improve Facility Layout and Workflow
You might be surprised at how much you can improve by tweaking the layout of your business.
Whether it’s a warehouse, retail store, factory or office. Optimising the space that your employees spend their time in can work wonders.
Improving the layout of your business will eliminate wasted time and unnecessary movements. Think about how you can improve workflow and employee efficiency.
Small changes, such as rearranging shelves and desks can make mundane tasks quicker. Create zones for specific tasks. Increase aisle width to improve access. There are tons of simple ways to optimise the space you already own.
Security and Safety Improvements
Here’s a capital improvement that gets…
Wait for it….
Neglected.
Security and safety improvements.
Sure they may not provide a direct return on your investment. But consider this. Why pay thousands of dollars for repairs after an accident when you can prevent it from happening?
Slip and fall accidents, burglary, theft and fire can all cost your business thousands. Not to mention damage to your brand reputation and increased insurance premiums.
Don’t wait for it…
Invest in your business by protecting it from these costly incidents. Improve lighting, install a fire suppression system and purchase safety equipment.
How To Prioritise Capital Spending
You can’t knock out every improvement on this list overnight. And that’s perfectly alright!
Look at the list above and ask yourself;
- What is costing the business money right now?
- Where is money being lost through inefficiencies?
- What capital improvements will allow for returns quickly?
For most businesses, warehouse optimisation and technology improvements are always a great place to start. Energy efficiency improvements are great long-term plays. And safety improvements will prevent unnecessary losses.
Prioritise one or two big-ticket items that will improve your pain points. Implement, measure the improvement, then tackle the next item on your list.
Wrapping It All Up
Investing in a business is the best way to grow. And capital improvements are one of the best investments a small business owner can make.
Just remember;
- Automating manual tasks and upgrading technology saves money in the long run.
- There’s a lot of unused space above your head. Take advantage of it.
- Small changes to a facility’s layout can improve efficiency.
- Saving energy = saving money. Don’t be afraid to make those small improvements.
- And always protect your business from costly incidents.
Pick one or two improvements that will really impact the business. See those improvements through and measure the gains. Then repeat!
By smartly investing in capital improvements, your business will thank you down the road.
