The saying goes "you've got to spend money to make money", and it's true to a point. But how do you decide what's worth spending on and what's an unnecessary expense for your business?
Today, I'm sharing the three things you need to consider before splashing the cash.
How will this actually benefit my business?
That course promising to help you get more customers and double your profits sounds awesome, right? It's totally resonated with you, and you can't wait to pay and get started.
But before you get your debit card out, wait a minute.
Is this a measured, reasonable decision? Has anyone you know or admire taken this course and got great results? Have you heard of the person running the course before or have they popped up on your social media? Is investing in this course really going to benefit your business, and how?
You can apply this to anything you're thinking about buying for your business. Don't get caught up in what you think looks exciting and glamorous. Yes, it is nice to have your own slick office in the city centre, but is the money you spend renting it making itself back in paying clients who are impressed by it, or your extra productivity working from there rather than at home?
Anything you spend money on in your business needs to earn its place, so before you hit "Pay Now", think about how this product or service will benefit your business - will it save you time and effort, or teach you something valuable?
How will this investment make its cost back (AKA what's your return on investment)?
Every investment you make in your business is just that - an investment. The purpose of an investment is that you get back more than what you put in.
Every time you make a business purchase, consider how this will help you to make more money or improve your business - your return on investment.
Here's a personal example. I pay £7 a month to use Buffer to schedule my tweets. This increases the number of page views I get on my website, which increases the number of people having a look at the services I offer and getting in touch, or having a look at my courses, deciding that they will help them and making a purchase. It also means that I can schedule 100 tweets instead of 10, so instead of doing that every morning, I can schedule all my tweets for the week in an hour and spend the time I would have spent doing that task every day doing client work and making sure my course content is up to scratch. So that £7 is definitely making my business more money than I'm spending on it.
You might spend £30 buying a potential client lunch, but if that client then decides to hire you for a project at £1,000, it's money well spent.
Try this with a business investment you've made recently and decide whether it's made its cost back.
Can I afford it?
Obviously all businesses require at least a little cash to keep them afloat, even if you run an online business. But if you're just starting out and have a limited budget, or you're trying to cut down on expenses, you need to figure out whether you can actually afford to pay for it.
It's a downer, I know. But you can handle these decisions, that's why you're the boss.
To decide whether you can afford to make that investment, work out how much money you have to spare for it, or whether you can get the money from somewhere, and compare it to the price of the investment.
Think about the two points I made above, how this investment will benefit your business and make the cost of itself back. Are the benefits and return on investment guaranteed, likely, or a huge risk? Could your wallet handle it if it proved to be a bad investment?
Those are the three questions to ask yourself before making an investment. Will you be considering these things before your next business purchase?
I'm a financial coach helping female business owners to gain the knowledge and confidence they need to manage their finances successfully and have a positive relationship with money. If you're ready to take control of your finances, click below to find out how I can help you.
I also create amazing resources to help you with your business finances.