Friday, April 27, 2012

3 Tips on Investing Wisely in Your Business

Gist blog:

In an ideal world, we’d all have access to unlimited capital, along with a team of mentors that recognized our true genius and supported our every decision.
But let’s face it – we’re startup entrepreneurs!  Getting things done on a budget isn’t just smart financial planning; it’s the only way to operate in an environment that forces you to be a lean, mean, business-doing machine.
Really, investing wisely in your business can make the difference between a company that survives its early growth periods and one that burns itself out before reaching its true potential.  So read on for more tips on how to make the smart financial decisions needed to lead your business to success:
Tip #1 – Spend Money Strategically
This tip might sound obvious, but the problem is that most of us are pretty good at talking ourselves into justifying any purchases we really want to make as “strategic.”  Of course, when you’re running on limited funding, you’ve got to be pretty strict with yourself about what constitutes a valuable business expense and which costs can be pushed aside until you’re better capitalized later on.
The following are a few “must have” expenses you can probably do without until your company has extra cash on hand:
  • Office space and office equipment – Yes, you need somewhere to conduct business, but in many cases, this space doesn’t need to exist in a separate office.  There are plenty of options out there that provide business space on a startup budget, so be sure to investigate these opportunities before committing to a commercial real estate lease.
  • Industry conferences and travel – While conferences can be a great way to make vital connections within your industry and network with your peers, there’s no arguing with the fact that they’re expensive.  If you feel you must go to a conference to build brand recognition, identify key contacts you’d like to connect with and determine which single conference they’ll all be at in order to maximize your investment.
  • Expensive training courses – Online sales pitches can be incredibly persuasive, but unless you’ve identified a specific education need that only a certain coach can fulfill, it’s best to hold off on expensive training products until you have the cash on hand to reinvest in your education.
Tip #2 – Recognize the “Time versus Money” Tradeoff
Time is what life is made of - spend it wisely...
Time is what life is made of - spend it wisely^ - NARA - 534959 (Photo credit: Wikipedia)
Now, although my first tip revolved around cutting costs, this isn’t an article on saving money or setting a business budget.  Instead, we’re talking about investing wisely in your business – and sometimes, that requires spending money.
For example, suppose you’re a skilled graphic designer who has a great idea for a web app.  Unfortunately, you don’t know how to code well – which means you’ve got to either learn web development yourself or hire the task out to someone with more experience in that area.  However you decide to proceed, there will be a cost associated with your choice – but it’s up to you to determine whether that cost will be assessed in term of time or money.
Of course, your specific situation will dictate how “time versus money” tradeoffs will be made.  If there’s absolutely no way you can spend money on your web app, you’re going to have to learn how to code.  On the other hand, if you have even a small amount of capital (whether your own savings or personal credit, or an investor’s monetary injection), you may decide to spend this money on hiring a web developer or on some even larger task that’s looming large over your head.
Be sure to investigate all factors involved before making these decisions.  Following our example, if the time it will take you to learn how to write web code risks erasing the competitive advantage your app would hold by being the first to market, it may be in your best interest to come up with the necessary cash.  Keep in mind the popular saying, “Don’t be penny-wise and pound-foolish,” and apply this bit of wisdom to the difficult financial choices that will need to be made within your startup.
Tip #3 – Seek Out Free Options
Finally, keep in mind that too many people automatically assume they’ll need to shell out their limited funds for the products and services needed to grow their businesses.  In fact, there is a wealth of free resources out there, if you simply take a minute to open your eyes and look for them!
For example, instead of hiring a web developer and burning through your cash as a result, you could seek out a coder who’s open to bartering web services in exchange for graphic design work.
Instead of investing in paid business management tools like Basecamp or Salesforce, you could seek out free alternatives, including Trello or Gist.
And instead of spending money on that expensive training program you know you want to buy, you could simply run a Google search for advice on your specific questions.  You’ll be amazed by how many free resources exist in the business world today that will give you all the information you need to succeed without requiring a dime in return.
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