Should You Invest Money in Your Business

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when to invest in my businessRight now in business I am trying to decide if I should buy new video equipment.

The biggest roadblock in making this decision is if I should invest more money for my business in this particular area.

Making this decision for me is part emotional and part financial.

What do I mean?  I am trying to figure out the right balance between perseverance, perfection and making sure the investment pays-off.

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Being a business owners is a fine balance between believing in something when others don’t, sticking with your goals and at the same time not ending up bankrupt.

Here are some of the questions I ask myself when I am evaluating business investments:

Outside Opinion

I don’t actually want you to go get an outside opinion, all though that can be good, instead I want you to look at the invest as if it was not your business.

If this was your friends business, would you invest your money in this?

If the answer is no, ask yourself why.  This can shed some light on problems that you did not think about for your investment.  It also has you look at your business objectively vs emotionally – after all most of us feel like our businesses are another child!

Return on Investment

Have you calculated your return on investment?  Will this purchase actually increase revenues or decrease expenses over the long term?

Before you make an investment, make sure it will pay off!

You can calculate the return on investment with this formula:

ROI = (gain from investment – cost of investment)/cost of investment *100

This will give you a percentage of return for your investment.  This of course is an estimate, but you should still try and figure out what it will bring in before spending the money.  (For more on How to Calculate ROI)

Spending money too many times without making sure it pays-off will make your business go broke! (Click to Tweet!)

Do You Really Need This

Sometimes in business we get so excited about what we are working on, and what our business owner friends are doing that we forget to stop and make sure we really need something.

I know I have done it where I find a class on some topic that I have started learning about and jump right in and buy it, only to find out that it really is not what I needed.  Yet if I had slowed down and asked if it was the right fit for my goal I would have passed on buying it in the first place.

Make sure you really need this to make your business successful.

What are the Other Options

Before you jump right in, figure out if there are other things that would work better.

Examples might be:

  • Does the product need discontinued instead?
  • Can you rent the item you need temporarily?
  • If it is marketing, are there “free” options that would work the same?

Try and brainstorm at least 10 other options for accomplishing the same thing without spending money.

What Does Your Intuition Say

This is where you need to trust the entrepreneur in you.  Sometimes after analyzing and looking at all the options, your gut just has to say go for it.

There are many times when the numbers just don’t make sense, but you know it is the right thing to do.  So do it!

Just be sure to make sure you don’t use this option all the time.  You still have to stay within budget and at some point make a profit!

These questions should help you figure out if investing more money into your business is the right thing to do!

 

6 comments
Kerin says December 11, 2014

Andrea you have done it again! I feel like you just have a great way of simplifying an entrepreneurs biggest struggles and helping them find clarity. As a chronic invester (with little/no return) this is probably my favorite post of yours and one that is being bookmarked!

    ANDREA says December 16, 2014

    Thank you so much Kerin, you made my day!

Lilly Steirer says December 11, 2014

This is so helpful– thank you! I put a hold on all investments for a small period in my business and I am just gearing up to make some decisions in the new year, so your timing for this is perfect. Just your first question alone helped me readdress some of my own issues with the next investment in my business. Thanks!

    ANDREA says December 16, 2014

    Lily, I am so glad it was helpful! Thank you for reading it!

Joanna says December 12, 2014

A timely post for me. I am considering investing a substantial amount in my biz early in the new year. These questions are resonating with me in terms of making the decision. Thanks!

    ANDREA says December 16, 2014

    Joanna, glad they helped, thank you for reading!

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