3 Questions You Need To Ask Before You Buy Another Tool
If you've been in business for any length of time you've undoubtedly heard the phrase - it takes money to make money.
But as with any simple catch phrase there's usually a lot more to it then meets the eye.
Most new entrepreneurs will be running their business on the 'bootstrap model' - aka paying for everything yourself rather than getting external funding. Bootstrapping is also know as 'running on a shoe-string'! (Though I have no idea where all the footwear analogies came from!)
What this means is every penny really counts because every dollar you 'invest' in your business is another dollar out of your own back pocket.
When money is tight it can seem safest to guard it, to skrimp and save to make the most of the little you've got.
And there is a lot of wisdom in that.
When you're starting up, especially with an online business, there are so many unexpected costs that can come up - so many tools and technologies, not to mention marketing and ad spend that can all add up.
Especially when so many 'business tools' now run on a subscription model (and usually in US Dollars - which rarely favourable, especially to anyone living Downunder!).
It does not take long before all those 'little' monthly payments add up to the cost of a full time salary. And it comes out of yours!
So Cost Management is an important component of running a profitable business.
There's actually a lot you can achieve using free tools and teaching yourself the basics. And this is usually a good starting point, at least until you've validated you have a viable business idea (ie. something people actually need and are willing to pay for!)
However, there comes a point in every business, often sooner rather than later, where you HAVE to invest (ie. pay money) in order to move forward.
And making the RIGHT investments can be the thing that makes or breaks your business success.
So, how do you know which investments to make?
How much is too much?
And when are you just throwing money down the drain?
Well there are actually tools that can help you work out what your return on investment might be BEFORE you take the plunge (and you can learn more about that here)
However as a basic guide, there are three main questions you want to ask when deciding if you should invest or not:
#1. Does this investment help me grow my business (ie. get more clients/sales) in a way that I wouldn't be able to achieve without it?
#2. Does this investment enable me to be more efficient (ie. do more in less time) or increase my profit (aka your salary) in a way I couldn't do without it?
#3. With that increased revenue and/or profit, how long will it take before I've recovered the cost of the initial investment?
Asking these questions is especially true when money is tight and there are thousands of different tools / courses / platforms out there all promising to be the game changer for your business.
My standard recommendation for people in this situation is to stick to the free or low costs tools until you reach the point where it's the tool that is preventing you from taking the your business to the next level.
Then Ask yourself: Will this investment help me achieve something I couldn't achieve without it? And how quickly will I see a return on my investment?
Basically if the answer is yes, and you're likely to get a return on your investment within the year, then it's a no brainier - especially if NOT having it is the thing that's holding you back.
This simple test can be applied to pretty much any tool, system or training on the market today, and should help you make more informed decisions about where to invest your hard earned cash.
And the good news is, while you may need to make the upfront investment in the beginning, as long as you've calculated your charge-out rate correctly, once you're generating revenue the business will start paying for itself - leaving you to spend your money on much more pleasant things!
Ps. If you want to find out more about how to calculate your return on investment, or what the right charge-out rate is so your business pays for itself, sign up to the How To Nail Your Pricing wait list and find out!