Seth Godin talked about it. (Someone must have told him it was Profit Week.) Meredith mentioned it in the comments yesterday. You hear people say it all the time:
You gotta spend money to make money.
And while this is true, it’s actually much more complicated than that. It’s not just about spending money. It’s about understanding when and where to spend money to boost your profits. When it comes to making a profit for your business, it’s not so much about about mindful spending, but about strategic spending.
Those of you who are trying to make a profit by not spending on the business, listen up! Part of embracing a culture of profit is understanding that sometimes you have to make an investment in your business.
When money is tight, it can be tough to know where to spend money and where to scrimp, so I’ve put together some guidelines for strategic spending to boost your profits:
Rule #1: Get help for the things you don’t have to do yourself.
Time is money. Yet for some reason, we have a hard time spending money when it could save us a lot of time. (And more time was the number one response when I asked what do you need to grow your business.) But if you take just one thing from this post, let it be this:
The fastest way to grow your business is to stop doing all the things that someone else could do as well as your better than you.
And the way to do this is to spend money to hire good people.
I’m actually making this my mantra for the rest of the year. I’m looking for all the opportunities to hire someone to do the things I don’t have to do so that I have more time to focus on doing the things I do best. Even though I have a basic understanding of HTML and CSS, I let Tara handle the redesign on Crafting an MBA. And I’m going to have her redesign my jewelry business site too. (She just doesn’t know it yet.)
And you’d be surprised at all the things you think only I can do this, when it fact there’s probably someone out there that can do it equally well. I make most of my jewelry by welding. And for a long time I thought, “I’ve spent years developing this skill, I can never have anyone else work on my products, no one can weld as well as I can.” And while it’s true that most people (even most trained jewelers) can’t weld as well as I can, turns out there are some people who can. One just happens to be one of my students, so I hire her to do piecework for me. (With the eventual goal of being able to bring her on as a more permanent fixture of Team Megan Auman.) And I’m looking into hiring a Virtual Assistant to handle some of the parts of my business I don’t do well and don’t enjoy. (Like managing an email marketing campaign for megan auman and cozy/cuff.)
And hiring someone doesn’t have to be a huge investment. Virtual Assistants and independent contractors can enable you to bring in help on a per project basis or for a few hours a week as needed. Giving yourself permission to outsource aspects of your business can free you up to focus on doing what you do best – being the creative visionary that drives your business. And that is money well spent.
Rule #2: Don’t spend money accumulating more supplies and materials.
My dad owns his own machine shop, so I practically grew up understanding the principles of lean manufacturing. But it’s something that we don’t talk about much in the crafts community. Likely because most crafters don’t view themselves as manufacturers. (Even though, as a friend of mine likes to say, “Manufacturing is just a fancy word for making.”) Lean manufacturing is the idea that you keep supplies and inventory to a minimum, ordering and producing in such a way that you never have much excess material or inventory on hand.
And boy, does this go against the nature of most crafters. We love the thrill of the hunt. Finding that perfect material that we just might use someday. Plenty of makers who wouldn’t dream of spending money to hire a web designer or PR agent will trot out the “gotta spend money to make money” statement to justify buying more supplies or materials. There’s a reason the biggest sellers on Etsy are the supply people.
But the accumulation of more and more materials is probably one of the biggest killers of your bottom line. Those piles of supplies and boxes of inventory are really just money that you can’t use to propel the rest of your business forward. If you feel the need to spend money on materials, focus that money on buying quality or unique materials that set your products apart. But that money spent on just buying more? That could be put to better use on a fantastic website, a new marketing campaign, or a professional looking wholesale catalog.
Rule #3: Focus on your primary revenue stream. (And be consistent.)
I am a huge fan of pursuing multiple revenue streams. But pursuing multiple revenue streams doesn’t mean each area has to bring in the same amount of money for your business. And it definitely does not mean you have to spend evenly across each revenue stream. If you’ve got a limited budget, you’ll get the most bang for your buck by focusing that money on one primary area of your business.
If you’re primary focus is online sales, invest your money in a kick-ass website, a consistent brand identity, high quality photography, a brilliant copywriter, and a marketing or SEO expert to help you drive traffic. If you love craft shows, invest your dollars in marketing and advertising in the areas where you participate in shows. If wholesale is your primary goal, don’t be afraid to invest in attending that big trade show or producing a high-caliber catalog.
Pick one revenue stream that you really want to see take off, and decide where you can spend money to drive traffic and sales. Then give yourself a few months of focus (and cash) on that one revenue stream. Stay the course, because most results aren’t instant. If you keep jumping from one area to another, you’ll never build momentum.
And even though you’re focusing on one revenue stream, at some point you can usually roll out the efforts from that spending to your other revenue streams. A consistent brand identity can carry over from your online store to your craft show booth. And a fantastic website and savvy PR agent will attract not only retail customers, but potential wholesale accounts as well.
The key to creating profit in your business is understanding when to drive growth, and when to save to keep cash in the bank. But to truly embrace the culture of profit, you have to become comfortable with the fact that sometimes you must spend money in order for your business to grow.
How strategic are you with your business spending? Where do you scrimp and where do you spend?
I’ll be the first to admit I don’t really have a strategic business spending plan. That’s a major downfall of mine which is why I’m taking your advice and looking for professionals to help me (like yourself). 🙂
Thanks Bridgett – I definitely think we can tackle the best places to spend money in your session!
awesome as usual – I’m finally starting to think about hiring a web person and a photographer. These I see as one-time big investments – something that you can’t grow without. I keep thinking of all the things I want to do and those are the two that everything hinges on!
How about a classifieds section on Craft MBA?! art friendly accountants, lawyers, photographers, web designers, jewelry models (!), travel buddies for craft shows, etc, etc !!
karen – you are a genius!
ok, genius is a bit strong …
but maybe a low tech kind of craigslisty kind of thing? where someone can post “where can I get a good source for linen?” or “wanna split a hotel room at Crafty Bastards?” people can do a direct email back or whatever. ok, it’s probably more complicated than that – like you need more to do right? Ha! future growth right?! or maybe this is what Etsy forums are for?
Great post. This is one of my biggest peeves with small businesses so I talk about this (in one way or another) frequently on smallerbox. Whether it’s scrimping on advertising, buying crappy looking “cheap” web designs or refusing to invest in proper photography and photo editing gear it’s all extremely short-sighted and preventing success. If starting a business was cheap/free everyone would do it.
My ecomm’s site biggest spend is advertising and it has helped grow our business. Our biggest time suck is PR and we’ve tried repeatedly and unsuccessfully to outsource this. We’ve proven time and again that we’re more capable in that department than any pro we’ve tried to hire which is kind of a drag. We’d love to pay someone to do it for us, but they’d need to do as well or better than us and we haven’t found that yet.
Meredith – your PR example is a great one for the most important aspect of rule #1. You should be hiring people who can do things better than you – if they can’t, it’s not worth hiring them!
Thanks for partially inspiring this post!
Megan – I don’t know how you do it, but somehow you manage to deliver awesome content, all the time. I really value all your insight.
#2 (don’t spend $ accumulating more supplies) is such a great point. I REALLY have to discipline myself to focus on purchasing supplies that will go to use right away. I love gem shows and at times I avoid them, even when my favorites are passing through town because I know I’ll just keep adding to my collection, rather than putting the focus (& my time!) on using my existing supplies to create products I can sell.
thanks Courtney!
I won’t even venture near a gem show because it’s something I never use in my work, but I still tend to get seduced by prettiness and want to buy them all!
Thank you for this article, particularly for rule #3! I was trying like mad to hit every single possible revenue stream, as a new business I should definitely concentrate in one to make sure it’s the way to go!
Hi Lizzet –
You’re welcome. Trying to hit every possible revenue stream at once when your small is tough – that’s why it’s great to focus on one to move that forward. (Of course, if you’re impatient, you can always employ other people to move more streams along at once.)
Reading this post has made me print off and start working on your ebook “business growth planner”. I have to work towards multiple streams of income, explore what is going to work for my business.
Point 2 really hit home for me last year while working through my books, seeing the money going out on sparkley beads and charms against my sales was a shocker. This year I have put a monthly limit of spending and a cooling off time. (This is to prevent me buying quirky supplies on a whim!)
Great post 🙂
Megan – you’re the best! This is so what I need to hear right now. You’ve sparked so many ideas in my head while reading this post that I’ve had to re-read it a couple times.
I spending the bare minimum at the moment, afraid to invest not so much because of letting go of the money but because I don’t know where to spend. I’m going to do some serious thinking and take guidance from your ideas.
Thanks again!
Bess
Excellent article.
I am a firm believer in spending money to make money, but your tips
really break it down and make it easier to identify
plans for doing it. Thank you!
Oh, I totally got nailed on breaking the #2 rule! I have a terrible habit of collecting and overbuying supplies and have still not figured out the ebb & flow of what I really need to have on hand when. This was such a helpful post & perfect timing for me. I’m getting ready to re-work my business plan & do a bit more financial planning to be able to hire my first part-time assistant this August. These things are going to be highlighted above my desk while I hammer all of the details out.
Thanks you!!
–Megan
I can’t tell you how much I appreciate good, solid advice! I’m definitely trying to decide where to put my money right now. I have a major problem with letting go of any aspect of my business 🙂
Okay, I perpetually violate tip #2 when it comes to buying fabric. The one upside to having a good, deep stash of fabric is that you can literally replicate the experience of shopping when you go down to the basement to visit the stash and dig through it to mix and match ideas for new creations. But there are times when I have to hold back on purchasing materials and use up what I have.
One thing I like to do is bring up the more difficult fabrics and trims, odds and ends, etc. Maybe 5-6 pieces of fabric and a bag of odd trims I throw in a bag. Then I challenge myself to make items with just those materials. It forces me to use my stash and get very creative in ways I wouldn’t have if I were to go into pure matching mode.
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Hey! My ears are buzzing on Twitter. Megan, this post totally spoke to ME!
So many good points and tips, just LOVE it. I am a huge overspender, both when I did my jewelry selling and now. The funny thing is, a lightbulb went off when you said, “Yet for some reason, we have a hard time spending money when it could save us a lot of time.”
I keep spending money on help, advice, & products yet all I truly need is a good assistant to keep me motivated and on task!
I officially declare NO MORE! Strategic spending here I come 😉
Ugh! I know this, I KNOW this! This is something I know to be true, and can see how it could benefit OTHER people (and me too of course), but have the hardest time walking the walk.
New resolution for myself: Must outsource!
Thank you so much, this post really hit home for me. I am still fairly new to all this and I have to admit that I actually violate EVERY SINGLE RULE! LOL!
So, I will finally spend the money on the things I need (I know I need advertising help), stop spending it on things I already have (fabric and yarn – sigh) I also promise that I will now concentrate on my online stuff…
Thank you!
Vee
Hi Megan–
I’ve been reading your blog for a long while and I have to say that I absolutely love how insightful you are. This post is very timely for me. I’ve been struggling with what to do exactly with my business for months, mainly because I’m moving this fall the Europe and I didn’t want to have loose ends. Not too long ago, I really started up again (summer’s here) and I’ve finally decided what I’m going to put my main focus on. It was very hard to part with cash when you’re virtually broke, but it’s essential to be seen. Awesome post!
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Just found your site tonight. Spent the last 4 hours reading many of your articles. Wonderful insightful advice, thoroughly informative. I just wish I learned all of this a few days earlier since I veered off the map on #2, you have my full attention now.