Investment vs Expense
6 questions to ask yourself!
Starting and growing a business can often feel like a financial strain.
How we approach the way in which we look at the purpose of the money being spent from a mindset point can change everything for us.
It is pretty well understood what expenses are.
In short, an expense is something that costs you money without the opportunity for further growth or time freedom.
Investments are when the money spent towards a thing, a service, or even an employee is going to reward us and/or the practice on the backend.
In essence, it gives us our time back and/or makes us/the business money.
When money is on the table, or being considered, a great question to start with is: Will this (thing putting the money towards) impact our business in a significant way to where we can afford NOT to do it?
So often, the first question is can we afford it? That question can be detrimental because this is attacking it just like you would an expense.
There are 5 more questions to ask that will help you to decide if the money potentially being spent is an investment or an expense.
Will this give us the ability to serve our customers better? Yes or No?
Will it improve my/our ability and knowledge of growing and running the business?
Will it help free up more time for me/my employees?
Will it make a difference in how satisfied our customers are?
Will it help to differentiate me/my practice in the market, and make me/the practice more different than I/it already am/is?
Answering “Yes” to any of these questions is a good indicator that the money is going to help make the business better for (us) and for (our) customers.
When we immediately write off things (say “No”) because it doesn’t fit in the budget, then we are approaching them with an expense mindset.
We see this in the coaching business all the time.
People will look at the cost purely as an expense out of their own personal pockets. What many don’t realize is that you can also write off the entire amount and not include it in your taxes at the end of the year.
From the investment in coaching, you are actually saving money.
You are also gaining the knowledge and the ability to run your company more effectively and efficiently; saving you time and money.
Many business owners will say (with regards to purchasing equipment, coaching, etc): “This isn’t in our budget right now.”
True. It isn’t in the budget because it wasn’t put in the budget, and it wasn’t there before trying to make this decision.
It isn’t helpful to say “It’s not in the budget”. Rather, we should figure out a way to consider if it should be put in the budget because of the investment opportunities.
Even when considering spending money for coaching, it is a good idea to ask yourself the same six questions:
Can I afford NOT to do it?
Will it help me to serve my customers better?
Will it improve or expand my knowledge in growing or running the practice?
Will it make a difference in how satisfied my customers are?
Will it free up more time for me/my employees?
Will it help to differentiate me/the practice in the market?
Chances are that you will probably say “Yes” to at least three of those questions.
We must also respect that every investment looks differently.
A large investment is never comfortable.
We have to look at our business savings account or our profit account and decide how we want to utilize the money.
As you grow a business, you are going to have to make more and more decisions based on investments in order to move forward. Otherwise, staying in the mindset that all money spent is an expense is going to significantly hold you back.
It is important to understand the simple foundations of investment and expenses.
We have to be able to go to the drawing board and say “Yes” to at least one of the six questions.
We see many business owners in the first years of their practice approaching everything as an expense vs strategic money being spent.
But when we answer some key questions, we can begin to look at things in a different way and take action.
Your Success is our success!
The UNCAGED team
Are you ready to invest in yourself and in your business’ future?
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