In business money can fly out the door as quickly (or sometimes more quickly) as it comes in, but the trick is in identifying what costs equate to you investing in your business, rather than just spending for the sake of it.
Committing your hard-earned money to the right things is one of the key to your business’ success (or even survival!).
How we like to explain it to our clients is that the aim is to invest not spend.
Try to get a return on everything you pay out for in your business. This focus on the return means you are investing in your business.
This may not be (and often isn’t) necessarily a monetary return, but it can be things like time, effort or brand awareness.
Let’s look at some examples:
1. Computer Equipment
PCs & Laptops: if you can afford it, get the best you can.
There is a time cost as well to replacing your set up every 1-2 years, or if your PC you use daily runs slowly.
2. Software, upgrades & backup
If your company machines run on Windows 7, you may know that Microsoft have ended their support after 10 years of the product being run. Their suggestion is to move on to newer versions of Windows, but how much will that cost you? What will investing into a newer operating system also get you in terms of efficiency and ways of working? Perhaps a newer system opens up opportunities for remote working with your team?
If you’re thinking of using cloud storage, how can you maximise what you get for your money? How secure is your cloud storage, and what do you get for your ‘freemium’ investment? What happens if you opt for a cheaper (and potentially less secure option), but then need to invest to rectify any breaches?
On the same topic, if you are an IT-reliant company, are you investing in good back up? How long would it take to return to your normal operating state?
What about your ‘app stack’ as it’s known – do you need all of these apps on an ongoing basis?
If you do, are you happy they are giving you a return on the funds in time or function? It’s easy to leave a monthly payment going and not review it in this area.
Printers are cheap these days, but what is the true cost of each print?
One of the key areas of saving we see in businesses regularly are where they are printing a lot and then move to a rented printer.
Alternatively, how much do you actually need to print these days?
4. Contracts & Legal
Can you get a lawyer to give a standard contract a once over to then replicate and edit for any amendments?
Does any professional body you are part of provide templates that can help?
What is the potential cost of not doing this properly?
5. Media & Advertising
Do you have marketing people, graphic designers etc on retainer?
The time you gain here is as important as the potential return on the advertising.
One thing cost-wise to consider is the impact – are you happy that paying for say just a few posts a week is actually doing anything for you?
What about dropping just £20 a month on Facebook ads?
Has that payment now strayed into the ‘spend’ not investment column?
How much time does this save?
Work out your hourly, daily or potential fixed price for work you could do in the time you are saving?
What tax could be saved from a professional doing this properly?
Is it actually a person you need, or is it actually some tasks that you need to offload that could be outsourced? Investing in hiring a person is probably one of the most important and expensive things a small business does.
Working out if you actually need a whole person is key to getting the spend/invest decision correct.
8. Training – for you or your team
Training can seem like an expense, but what better way to invest than in yourself or your team to improve your skills for the long term?
The trick is to make sure you are investing in the most impactful training.
But I don’t have the budget!
This is always a challenge regardless of size.
With some services, it’s more about working out the impact on cash flow for the initial spend before seeing a return.
Investing in your business means you need to work out what you can afford right now, and how long you expect to see the return to take.
Accountancy sometimes finds itself in this column (we know this one well…).
You are paying for a reduced tax bill through efficiency, which you may not see the benefit on for a while, and/or more time, which may take a while to see the cash benefit in your increased productivity.
For advertising, you may be paying for 6 months before your sales cycle is complete and cash is in the bank (presuming it’s worked!).
In the early days, it’s deciding how you find the cash for these types of services, and which is the priority over the other things vying for your money.
Want to talk to us about your current cash flow? Get in touch.