How individuals look at money
Doesn’t money come and go? It flows in and it flows out. In a business there are very defined expenses and investments. However, if you aren’t a business owner yet, you may not always put your spending into one of these categories. As individuals we look at all of our spending as an expense. We might look at our retirement savings, house upgrades or stock market purchases as investments, but we look at little else as an investment. I want to talk to you about what you should classify as an expense and what investments you might be missing out on to increase the probability of your new business being successful.
My first real job was in advertising sales. I was in my early twenties and I had no idea what it even really meant to be a salesperson, but my boss said I had what it would take to be successful. I believed her and I’m glad I did. At that first job I received extensive sales training. It was a gift that I didn’t realize I’d been given until many years later. In the process of my training I was told you never refer to the cost of the advertising as an expense, but an investment. I liked that way that sounded, an “investment.” I felt very grown up and used the word whenever possible. I didn’t really understand what it meant, but I used it anyways and when people asked me what it cost to run ads I told them their investment would be thousands of dollars.
How businesses look at money
Where I really got stuck was the thousands of dollars part. I was selling radio advertising at the time and to get enough advertising to get results, a business needed to spend at minimum $500, but really for good results $1,000 per month. At the time I was bring home about $1,500 per month. So a $1,000 commitment was really hard for me to swallow. I needed to go out and ask these people to give me basically my entire paycheck each month. How could that be a good idea??? I was totally dead in the water. Then one day my manager realized I was having sticker shock and gave me some great advice. He told me that these weren’t people just spending money, but businesses investing in growing their customer base. When they got people in the door to buy products from the ads they’d purchased, that money would come back to them and would not only cover the initial expense, but make them much more money.
Next he asked me, “Would you spend $1,000 on t-shirts for yourself?” Of course the answer was no. “But should a business spend $1,000 on t-shirts if they know their customers will wear the shirts and bring in thousands of dollars in new customers?” Of course the answer is yes. I was projecting my own level of personal spending on that of the expenses of a business. My clients were investing in the success of their businesses by advertising and getting in new clients. Advertising isn’t an expense for a business — it is an investment.
Investment = Commitment
In 2014 I decided that I was going to get in shape. I didn’t care how much it cost, I was going to be in shape. I’d had a gym membership for several years and like most people I NEVER went to the gym. The membership wasn’t all that much, I was spending $75 per month for both my husband and myself. I cancelled my gym membership, which by the way is always more expensive and difficult to do than it should be, but I cancelled the membership and decided to look else where. I decided that I needed a personal trainer. I live in a small town so I went to one of the two personal training studios and was ready to sign on the dotted line. I figured that since I’d been spending $75 a month on two gym memberships I should be able to get a personal trainer for one person for about $100 a month. Well it turns out you can’t. After sitting down with the trainer he recommended group fitness classes and an unlimited class membership for $179 a month. I almost had a heart attack. $179 a month??? Was he insane? So I went home and I thought about it and I thought about it and I thought about it and this is what I came up with. How much was I willing to pay for my health? It turns out $179 per month. But here’s where the story gets really good. I went to the classes and I was really pumped up for about a month and then I got tired of it. I got tired of going. I really didn’t want to go anymore, but then I remembered how much I was paying for my membership. I was paying way too much to not go to the gym. If I wanted to not go to the gym I could pay $75 per month. I HAD to go work out and so I did. I worked out through the first month and the second month. I worked out through the first six months and I worked out through the first year and now I’m hooked. I love working out! It is so much fun and I feel great. I invested in my gym membership. It isn’t an expense because it pays for itself. If I hadn’t given in to paying a ton for the membership I wouldn’t have been as committed.
Invest in your company
When you start a business, you have to make investments. Even if you’ve decided to “bootstrap” your startup, you need to know when and what to invest in. There are certain investments that you must make. For each start up its going to be different. It may be investing in the right technology, the right bookkeeper, the right manager or the right business coach. It might be an investment in a good website, store front location or advertising and marketing plan. There are investments you must make to be a successful in business.
Figure out what those investment need to be and stick to your guns. Be aware of your budget and don’t over spend. Remember always that investments aren’t expenses. Expenses are a meal out on the company, new furniture for your store that you really don’t need or unnecessary employees or not negotiating a price down. Expenses are any money spent that will not return itself plus some to your business. Investing in your knowledge base, having an accountability partner and hiring a coach to help you discover success is not an expense, it’s an investment. When you start a business you need to ask yourself what you cannot afford not to spend.