6 questions to ask yourself

It’s the age old battle – When is the right time to invest in your business versus when is the right time to lean back and hang on to your money?

In today’s episode, I share six questions to ask yourself in uncertain times, to help you make smart investments for business growth.

Shownotes:

  • What is your current capacity to invest?
  • What is your appetite for risk?
  • What is the reason you are wanting to make this investment?
  • What (and when) is the anticipated Return on Investment (ROI)?
  • What are the energetics around the investment decision?
  • How could I make this happen?

Transcript

* Transcript created by AI – may contain errors or omissions from original podcast audio

 It’s the age old battle. When is the right time to invest in your business versus when is the right time to lean back and hang on to your money? In today’s episode, we’re going to be diving into this question because in uncertain times, decisions around investment can be challenging to make. So today I’m going to share with you six questions to ask yourself to make smart investments for business growth.

 Okay.

 So speaking of smart investments, see what I did there. Have you checked out my course the Profit Academy Foundations. Doors to this live round to only open for a few more days. Foundations is my step by step framework to really understand your business finances without any of the confusing accounting lingo, so that you can grow your business profit with a clear step by step process to do so.

As I said before, doors are only open for a few more days. So if you are keen to become a master of your money, Go and click on the link in the show notes for today’s episode to find out more.

Working out whether to invest in your business in any area, whether it’s a course, hiring a new team member, working with a mentor, buying a new membership, whatever it might be, it can always be a challenging decision to make and I certainly don’t have all the answers, but today I am going to share with you some questions to ask yourself when you were looking down the barrel of a big investment decision, and you aren’t sure which way to turn.

The very first thing, and again, this is probably the accountant in me coming out, I want you to really take a moment and check what is your current capacity to invest. When you are thinking about this, I want you to consider a couple of different factors.

Firstly, what is your current income and what is your projected income? Don’t just look back at how your business has been performing the last couple of months, particularly if you’ve been in a high growth period and you aren’t sure if that growth is going to be sustainable. Also have a think about how your business income is going to look over the coming months or even years in which you are looking to make this investment. Part of having a look at your capacity to invest is also looking at your current liquid assets in the business. And I use the word liquid because this means something that is easily convertible to cash. Let’s just say that you own an office space or a warehouse or a ton of stock. It’s all well and good to say, well, I’ve got my office space that’s worth a million dollars. But if you know that it would take months to sell a commercial property. It’s not really a liquid asset. It’s not something that’s easily convertible and easily able to be used as cash if you came into a situation where you needed money really quickly. So check in on your business assets. How much savings do you have inside the business? And it’s also worth having a look at your assets outside of the business as well, but bear in mind that they would then have to be a loan from you personally into the business. You can’t just transfer money in and out of the business as you please. The business is a separate entity. So if you are planning to use personal assets or personal cash, just have a think about, you know, the implications that that will have for your business in terms of tax and in terms of paying money in and out of the business.

So having a look at your current capacity to invest is really important. And I think it’s also particularly again, depending on the size of the investment, if we’re talking about a significant investment, maybe you’re looking at, hiring a new team member or joining a mastermind, something along those lines that is a significant financial investment. It might also be worth having a bit of a think about your backup plan.

So the backup plan is something that I guess I use as a conservative in the back of my head, get out of jail free card if things would all go pear shaped. So for me, in our personal name, we have some shares that we own. And it’s one of those things, I have absolutely no desire to sell the shares I like hanging onto them. It’s not something that I, am counting on for day to day cashflow in the business, put it that way. However, it’s nice to know that it’s there.

So for example, if my husband or myself are making a significant investment in our businesses, we do know that we have that reserve there if push came to shove. Now this might look different for you. Sometimes the inverted commas backup plan is that you might have family members that, you know, look, if this really went pear shaped, I could borrow some money. There might be, some other options that sit there for you. Maybe your backup plan is that you know, that you’re pre approved for a business loan and you think, you know, if you would have burned through your savings, you might say, I know that I’ve got that as a backup plan that I could always borrow some money.

Now, this all leads me into the second thing that you need to consider the second question to ask yourself when you are considering making, an investment big or small is what’s your appetite for risk?

So I am someone that has a pretty high appetite for risk. And I mean, being an entrepreneur in and of its own, right, probably is a strong indicator of that. But, you know, I’m someone who is willing to probably take a bit more risk than the average person. But in saying that, you know, I know that I’m actually. A bit more conservative when it comes to my finances, then perhaps some other people are an example of this. I know a couple of people who have sold their home, their primary place of residence to invest into the business, to, to buy a program or, to invest in other ways in their business.

Now for me personally, at this stage of my life, that doesn’t feel aligned, but I know for some other people, that’s how they roll. They are happy to take on that risk and really lean in. So it might be worth spending some time reflecting. What is my appetite for risk? And I, someone who’s happy to put it all on the line for this particular investment, or does that not really feel good for me.

Your appetite to risk might also be connected to your capacity to invest and that, that buffer that we spoke about earlier. So for example, if you’ve got a hundred thousand dollars sitting in your business bank account, you might be a bit more okay to lean in and make a $2, 000 investment in a course as compared to a $20, 000 investment in a mentor. Again, you’ve got to work out what feels right for you and what is the right decision for you at any stage in your business?

The next thing, the next question that I really want you to consider when you’re working out if something is a good investment or not, is to reflect on what is the reason that you are wanting to make this investment?

There’s a whole bunch of reasons why you might want to spend money inside your business. It might be on branding, you might want to get a new logo designed a new website, some beautiful new photos. It might be on visibility and profile, maybe you are wanting to pay a PR agency so that you can get in the news, in the media. Maybe the investment that you were considering is really focused around short term sales. So you might be wanting to set up some Facebook ads in the hopes that that’s going to deliver you a really fast return. Or maybe this investment is in connections and relationships? I know that I’ve spent a ton of money in this space. I’ve paid to be in the room in masterminds in retreats, I’m paying to be around people to inspire me and to connect me to my next level of business growth.

So really have a bit of a think like, why am I doing this thing? Maybe you’re investing because you’re just so overwhelmed that you’re not coping. Maybe it’s for mental health reasons. Maybe it’s so you can have more time with your family. Take a moment and reflect what is the why behind this?

And this might help with the next part of the decision making process, which is around the ROI or the return on investment. So what I want you to think about for this next question is what and when is the anticipated ROI?

So ROI means return on investment. It means how much money are you expecting to get in return for the money that you put down? Essentially, how much are you anticipating you’ll get back if you spend some money now? This can and will look very different again, for different stages of your business, for different investments that you’re making. Your capacity for risk will determine how long you’re willing to wait for an ROI or return on that investment. Some of the large organizations that I’ve worked for were happy to wait six, 10, one company I worked for was happy to wait 20 years to get a return on investment. Now, I will be honest with you, the kind of returns that these bigger companies are talking about are massive and because they have a huge equity base in them, they can say, Hey, I can wait five, 10, 20 years, because I’m anticipating I’m going to get so much money back off this. But perhaps for the average Joe, we might need to get our money back a little bit sooner than that.

So let’s talk a little bit more about what this looks like. Let’s say that you are hiring a new team member, that’s the investment you’re considering. I’m going to hire myself a new team member. Now again, not always, but it’s highly unlikely that in month one of bringing someone on board, that they will recover their cost through the additional sales that they’ve brought into your business. I mean, from my experience, usually it takes at least a week, if not a couple of weeks to get someone set up on their computer systems, to onboard them, to teach them a bit about your business. And that’s just getting them onboarded, let alone actually them getting stuck into work and gaining the returns off the back of that. In some businesses it will take months or even years before you recover the investment in a staff member. And again, I was trying to think of an example and I thought of like an Apple computer developer. And I mean, I can imagine that they must hire these tech geniuses who work on something for years and years and years and basically the company is just running at a loss on that particular role until they have their big breakthrough. You know, in my husband’s business. So my husband runs a recruitment firm and he hires recruiters and the way that it works, from the minute they walk in the door, he’s paying them a pretty decent wage for month one. And it’s also not just their salary, there’s on costs to having staff, you know, you’ve got to pay them superannuation and, other sorts of allowances and things. He also buys his team members laptops, phones, subscriptions, they need access to all of his systems. Sometimes he’s been flying people, interstate for training to conferences etc for there’s a lot of investment that goes into a new team member.

Now these are salespeople, in theory, salespeople are supposed to bring in more revenue into the business. So let’s just say that he does hire someone and in month three, they make their first sale, but the way that it works is often a lag between when the sale actually happens and that cash physically hits the account. So it might be month four before we receive a cent of revenue off the back of one of the team members. And even when that money comes in, they’ve then got a back pay, the return, they’ve got to cover then a couple of months where we’ve been funding that gap to pay for their salary, their costs, in the interim. Now, I guess this is just something that I want you to consider when you are making a big decision in your business. Is this something I’m anticipating is going to deliver a return? And when will I get a return? Particularly with team members, you need to allow a decent buffer amount of time before they’ll actually be adding a positive return into your business. Now your business might be completely different. I just wanted to highlight the example and get you thinking.

One of the ways that I use this myself is that I do a quick ROI calculation. I’ve actually, I’ve given inside my course that I mentioned at the start, the Profit Academy foundations I’ve given as a bonus, the ROI calculator that I use myself. And the way that I use this is I say, okay, if I’m going to go and invest, I don’t know, $25, 000 into this thing, what do I anticipate the returns going to be and when, and is this a worthwhile or a smart decision for me to make? And I use the numbers around it to actually work out and support me in that decision making process.

Question number five is a little bit of a left field one, but bear with me on this. It is, what is the energetics around the decision? Now I know this sounds a bit woo for an accountant to be talking about, but let me explain. I want you to check in on how you will feel if you do or don’t take up this opportunity.

Maybe you could take a little moment, shut your eyes and think about when I think about spending the money on this thing, do I contract? And that means do I sort of go, Oh, it makes me feel sick. Or does it make you expand? Does it make you feel excited? And let me share an example of each.

I recently invested in something and even at the time I kind of had an intuitive feeling that it wasn’t the right decision to make, but I did it anyway. I think I made the decision perhaps from a place of desperation. And also I thought this thing is a bargain. So I lent into it and it didn’t live up to my expectations and every time the payment rolled around, I felt just a bit deflated about it. I didn’t think, Oh, I’m so glad I’ve done this thing. And other times when I think about an investment, I just think, oh my gosh, it excites me so freaking much to do this thing. I remember the feeling many years ago where one of my mentors put a retreat up offer and I thought I have to go to this thing. It was someone I so looked up to, it just, I had zero idea how I was going to get the money, but I just felt so excited and expanded by the opportunity. So really check in on how it feels energetically. Are you super excited about it? And, you do need to balance that between the nerves of investing as well. Sometimes we can feel scared and we interpret that as our intuition, but actually it’s just fear. We kind of know we need to do the thing. There’s that feeling of fear. So check in, is it your intuition? Or is it, is it fear that’s popping up for you?

When you’re making decisions, there needs to be a balance between the logical and the emotional aspects of the decision making.

And let me explain a little bit more what I mean by that. I recently nearly invested in something because I was just so damn excited. I was like, I want to be there. I want to be part of this. It looks so cool and so exciting. But when I stepped back and evaluated it, logically, I realized that I didn’t need about 75 percent of what this program was offering. I was just more excited about the buzz of it than actually needing the transformation that was promised inside, if that makes sense. So yeah, if I was in a place where, you know, I had a heaps of excess cash flow and I was just wanting to do something really cool and fun, I probably would have lent into the opportunity, but for me at this point in time, it just, it didn’t really feel aligned because I, I didn’t really have the strong logical need for that investment, but you do need to weigh up, Is this something that I need to do in my business?

Sorry to use my course as an example, but like, for example, business finances, you might think, Oh, it doesn’t feel super exciting to me as something to do. But logically, you know, getting across my numbers is something I really need to do for the longterm success of my business.

I feel a bit like that with legal sometimes, you know, paying for contracts doesn’t feel, yeah, this is super exciting, but it does feel exciting to me to have a business that’s protected, to have strong contracts in place. And logically, it’s also something that really does make a lot of sense to invest in.

So this might look different at different stages of your business. And again, it might look different at different times, if you have a big cash buffer, investing in a luscious new website might be a great investment, but if cash is a bit tighter and you know, your business doesn’t rely on the website for conversion for sales, then perhaps it might be something that you want to, you know, hold on for a little bit.

The final thing that I want you to consider, if you have gone through these questions and you’ve weighed up your capacity to invest, why you need this thing, you’ve lent into the energetics around it and it, it does make sense for you to do this thing logically. And it feels expansive from an intuitive space as well. I want you to ask yourself this question. If I really, really want it, how could I make it happen? If something is is ticking the hell yes, this is exactly what my business needs right now, the logical side, and that hell yes, it excites me so much to hire the team member, the coach, do the course, whatever it might be. Ask yourself, how could I make this happen?

An example of this years ago was that I really wanted to get porcelain veneers on my teeth. And I went and got the quote from the dentist. It was a lot of money. So I asked my dentist if he had a payment plan available. And he, he said, look, you’ve been a long term patient of mine, I really trust you, this is what this would look like. And so I ran some numbers on it. And what I realized was that if I took on two additional voxer clients at a thousand dollars each a month, By the time I took out the tax off the top of that, I could then cover the repayment plan on my veneers. So basically I worked out a way of how to make it happen.

Other examples, there’s often been courses that I’ve wanted to join or a retreat that I’ve wanted to join. I have not had the cash sitting there, but they’ve offered a payment plan and I thought, okay, I don’t have the cash sitting in my bank account right now, but there is a payment plan. And boom, that’s my how, that feels really aligned. And I’m overlaying that mentally with the ROI or the return on investment. I’m thinking, okay, I make three of those payments by month three. I might’ve made another sale from the skills I’ve learned inside this program. And so I’ll have covered the cost of the repayments and then everything from there, you know, I’ll be having a positive return on investment.

So this is how I want you to start to think about your investments using the logical components of decision making, along with some of those intuitive feel good factors as well.

If one of the things that you are considering at the moment is investing in my course, the Profit Academy Foundations doors are closing to this live round in just a couple of days. So go and click on the link in the show notes for today’s episode, find out more about it. This is a live round, which means that you have weekly Q and A calls with me to ask any questions that you have about the program. And you know, one of the entire modules inside the course is about profit growth. It’s about pricing. And I get deep with my students inside this course. We really problem solve inside individual businesses inside those Q and a calls. So there’s quite a bit of capacity for getting coaching support from me to really help you to not just understand your business finances, but also to grow your business profit.

I hope you’ve enjoyed today’s episode about investing in your business. Please drop me a DM, let me know what were your ahas from the episode. If you enjoyed it, make sure you share it with your audience on social media and make sure you tag me so I can thank you. And I really appreciate you coming by, listening to the Clare Wood podcast.

I hope you have a beautiful and productive week and I’ll chat to you again next week.

* Transcript created by AI – may contain errors or omissions from original podcast audio

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