What investments are you making in your small business this year? No doubt you’ve got lots of plans for the year ahead!
You probably want to increase your profit, and maybe that means reducing your costs. But be careful about how you decide which costs you don’t need!
It’s common for small business owners to consider all money going out of their business as ‘expenses’ – and in thinking this will try to cut and avoid incurring them, to increase personal earnings. BUT, if there’s a benefit, a gain to be made, it’s actually an investment. And investments are a good thing if done right.
So, when you jump into money-saving mode with costs you’ve already got and new ones you’re weighing up, ask yourself – what benefit does/will this give me? By having this cost will I save on something else?
Types of investments for small businesses
For example, let’s talk about outsourcing to professionals. So many business owners consider an accountant a huge expense, and one that they wish they didn’t need. BUT – get a good one and it’s a great investment.
Not only does it save you all the stress and anxiety of getting your tax and accounts done, but it also saves you the time you waste muddling your way through it – time that could be better utilised elsewhere in your business – like making money serving clients, or putting together marketing campaigns that are going to bring in a flood of new clients.
And let’s state the obvious – the knowledge they have could save you hundreds, even thousands in tax – way more than the fee you pay them. On top of that, you get reassurance – security that you aren’t going to get hunted down by HMRC for drastically misstating your profits or missing a deadline. And that is worth it alone!
Do you need to spend money on an advertising campaign like Facebook ads? Again, that’s an investment – hopefully one that’s going to bring in lots more clients and lots more sales.
Software – are you spending what feels like constant amounts on new subscriptions – social media planners, accounts software, mailing software? Again, they’re all there to save you time and money. Time for hopefully making the tasks a hell of a lot quicker, freeing you up to work on the stuff that matters!
Machinery/tools – are you buying these not because they’re a shiny new object, but because they’ll make your life easier, and jobs quicker? If so, they’re an investment too! They’re a way to constantly stay on top of your game and refine your processes, so you can attract more clients and work more efficiently.
Here’s one that’s often overlooked – education. Spending money on books, courses and mentors that are specifically to help build and develop your skills within your business, are amazing investments.
Consider how much value you’ll bring to your business once you’ve got the extra knowledge. What things can you do with that knowledge? Improve your marketing? Improve your financial skills? Improve your sales funnels? They get you from A to B a LOT quicker than fumbling around on Google and YouTube, making costly mistakes in the process.
So, what I’m saying, is really consider if what you’re spending your hard-earned money on is just a ‘cost’ that you could do without or actually one that’s going to improve your business – an investment. One that if you take away, could actually have a far bigger impact in the opposite direction, like losing sales or your available time to serve!
The key thing with small business investments is that you perform a ‘return on investment’ calculation. And before you start thinking I’m getting all jargony on you, it really is more simple than you think. You just compare what you get back from the investment vs the cost of it.
How on earth do you work out if it’s a good investment?
For time, estimate the number of hours you‘ll save by making the investment. For example, how many hours will a bookkeeper free you up for?
What else can you use those hours for?
Is it more time to offer an extra coaching call a month? If so, how much will you charge for this call? That’s the amount you’re comparing.
For money, you’ll need to estimate the cash that the investment will generate. So, let’s say you’ve got a renewal coming up for a subscription to a networking club. Look at how many clients you’ve won from this club already and the sales you’ve made from them.
Ideally, you need to be calculating an estimate of the return before you make the purchase, but it also makes sense to continue to calculate throughout the journey to make sure it’s still working out for you, because things change in your business, and you don’t want to continue paying for things such as a subscription that doesn’t serve you anymore.
If the return doesn’t look great after you’ve spent the money, ask yourself if you’re really utilising it to its full potential to see results. Can you do more to make it work harder for you? If not, then you know not to invest again.
So, just think about costs carefully before you dismiss spending. If your umming and ahhing about some new shiny software that promises the world, play around with some numbers to see how much additional money that could generate for you rather than just focusing on the cost.
Small Business Mindset
It’s a mindset shift, to be comfortable with investing. And this is often hard for small business owners and solopreneurs when you’ve built everything on your own. Personally, this is one thing I was bad at in the past – because if I can do everything myself right (even if I’m up all hours) why would I pay someone else to do it for me?
Now, I know it’s a no brainer.
To grow you need to move forward and often that comes with an initial price. However, as long as you have the cash (and this is NOT to be overlooked) investments can deliver serious benefits.
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