Monday’s post brought out a lot of interesting comments about how you would spend money on your business. Some of the answers were more surprising than others, but they all gave me something to think about.
One of the answers that I found particularly interesting was that when it came to the $50,000, several people said they would invest at least a portion of it.
Now, I understand the logic behind it. Investing is good. And you probably aren’t going to spend $50,000 on your business in one day. And investing will give you a much higher rate of return than leaving that money sitting in your checking account until you’re ready to spend it.
But on the flip side, I want you to get comfortable with another idea. That spending on your business is a financial investment.
One with potentially much higher yields than even the best money market account.
For example, I can take $50 in materials and $100 in labor and turn that into $450 of product. That’s a 300% return on my investment. In one day.
Or I can spend $2,500 on a trade show booth and write $10,000 worth of orders. Or you could spend $300 on advertising and sell $1,000 worth of products. You get the idea.
Now, I understand that investing in your business can be a much riskier investment. It’s hard to know if a marketing plan will pan out. Perhaps that new product line will be a total flop. But in order to find out, you have to be willing to invest. And you have to be willing to take risks from time to time.
However, you can mitigate those risks by making smart decisions when it comes to your business. Just like when it comes to traditional investing, it’s important to do your homework. Certain investments will always yield a higher rate of return. For instance, $500 spent on marketing will likely yield a higher return than spending $500 on materials that just sit in your studio.
Though in reality, you probably wouldn’t spend all your money on one thing like in the example above. Just like with your portfolio, it’s important to diversify. Which is why you might spend $150 on materials to create $2,000 worth of new product, which you’ll then spend $350 marketing. (For those who don’t like math, if you sell all that product, that’s a 400% return on your investment.)
But one thing I’ve noticed is that investing in your business actually means investing in yourself, and that takes confidence. It takes a lot of confidence to believe that you can take that money and turn it around to make a profit.
I was amazed at the number of people who wouldn’t take the $50,000 if they had to pay it back. In order to take the 50k, you have to believe that you can turn that money into something much bigger. You have to see that money not as debt, but as an investment that has the potential for incredible returns.
And you have to believe that you are the person with the power to make that happen.
I’d love to hear your thoughts in the comments. Do you consider spending on your business an investment? And what’s holding you back from making bigger financial investments in your business?
{Invest in Art photograph via RoyalFotographique on Etsy}
I definitely consider spending on my business as an investment. That’s a no brainer to me.
At this time in my life I am unwilling to spend a lot of money and take that risk. I have a family to think about and I would feel horrible if I lost that money and caused hard times for my family.
I truly admire people that do take that risk. Those people that do give them selves an opportunity to become successful a lot faster than me. I have a good friend who took a big financial risk and she is doing great. I’m so happy for her.
That being said I am happy where I’m at. I’m building my business slowly and I know a day will come when I’m able and willing to take a big investment in my business.
I would spend a portion of the money on supplies and tools. If I don’t have the right tools then I can’t produce and if I can’t produce, I can’t sell. I wasted a lot of time and money last week because I did not have the right camera. I spent the week running around buying lights and setting them up and trying to take pictures that didn’t work. Instead, I could have been producing jewelry and marketing it. Finally I broke down and asked a relative for a loan and bought a camera and lens that would get me the pics I needed. I feel that a big hurdle is gone and with that comes new energy. My frustration was wearing me down.
I found the comments to your original post intriguing and kept returning to read more. It gave me kind of a boost of energy actually. It really made me think. My business has been growing slowly – at a pace that I can handle at the moment. Money best invested for me would be a right hand man/woman to make all those phone calls I don’t want to and and maybe to make appointments to get my foot in the door. That way I can spend more time designing and creating rather than procrastinating – trying to avoid making those phone calls and sales calls because I’m not really comfortable with that part.
Background: Started a small business about 10 months ago. It’s not paying the bills yet so I have to work at a full time day job, meaning I don’t have the time to dedicate to my business that I’d like.
I feel like I’m spending and spending on my business, but without the time required to make product and market it, I’m not earning those big profits. This makes me hesitant to take on more debt because even if I can “invest” it in my business, I still won’t have the time to earn it back and would end up feeling even more trapped in my day job because now I’ve payments to make towards the debt. AHHH! Vicious cycle!
This is a really interesting subject. I was a pretty successful mural artist for many years until the meltdown 2 years ago. Since then I have started a new business, and quite frankly been all over the place, emotionally and financially. It was easy for for me to answer the questions you posed yesterday….$50- materials, $500- new camera- $ 50,000- assititant, marketing, gift shows,and manufacturing,but the interesting part for me is, should it be a loan, or find someone or a company to invest in me???
My first year I wanted to go into Anthropologie immediately! Be in print mags immediately! Now, I feel very comfortable where I’m at. Starting slowly, building a client base, opening an online store, developing the best affodable art I can…..and when I’m ready I will definitely take the bigger leap,and find the $50,000 or more, but I think it will be from a investor, not a loan…..maybe the last two years have been affected us all in a way that makes me at least still a little apprehensive about the future….. and the risk
I have a hard time figuring out where to advertise for the best results. It’s not that I’m unwilling to spend money, it’s that I don’t quite know where to spend it.
Lia posted pretty much exactly what I was going to say. I know that investing in my crafty business is crucial if it’s going to grow. However, my business is not even breaking even yet, much less paying the bills, and I have debt and a huge mortgage (taken on before I had any inkling I’d want to start my own business). I actually just took on a second job in addition to my day job and my own business to try and recover from the numerous financial hits we took this year (pay cut for me, job loss for my partner) so now I’ve even less time!
I fear I would never be able to earn back that $50,000, if I had to repay it, just because of the lack of time.
Great post! These are points I try to hammer on Smaller Box too. Funding your business and investing in it wisely can make or break your venture.
All money spent on my business is an investment in it. And I definitely spend a fairly substantial amount on it.
That said, I would never, ever, nope, never take on debt – no matter how tempting it might be to do so. Does this mean that my growth is slow? You betcha. Does it mean that it’s controlled – yes!
I’m pretty sure that there are schools of thought that will tell me that it’s better to take out a loan and invest in my business, and I’m certain that works very very well for them. But debt scares me. It means that if you do not do well, then you can have someone swoop in and take it all away. By sticking to a tight budget though, it’s easier to ride out the bad times.
That said, every penny that I can afford goes back to the business. Supplies must be bought. Shows must be gone to. Taxes must be paid, as well as the insurance. My contractor must be paid and the books must be checked at least once per year. Advertising and expansion must be done and through all that, I need to be paid a half decent wage for the work I’m doing.
Makes me wish I had that 50K – or 5K – or even the extra 500. It would all go back into the business.
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All good points raised. What struck me most is that it is an investment in myself. Do I have the confidence needed to put a plan into action, goals to reach for, deadlines to meet? Yes, I think I do. I am in the beginning stages of seeing what is possible. I have been working this as a hobby-gone-wild and now it is time to dip my toe in the water. Next week I will start by cutting back my day job to four days a week. My goal is to make that up within 6 months. Then I can pull back to 3 or even less per week. It might be slow, but I know that it will work. All that I have had success with especially this past year is from not really trying. I am ready to start trying and this is a step in the right direction. Thank you for provoking me to think about this.
Enjoy the day!
Erin
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“I would never take on debt – no matter how tempting it might be to do so. Does this mean that my growth is slow? You betcha. Does it mean that it’s controlled – yes!”
I think this is an excellent point – as Claudia said, not taking on debt means that you can CONTINUE investing in your business and being CONFIDENT in what you can do NO MATTER WHAT HAPPENS. It means you are always in control, and much more free to experiment and take risks BECAUSE you are not a slave to the repayment.
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