Frugality is an important quality in a business owner. Even when times are good, you need to keep a close eye on your spending because this will help you build both a cushion and smart money habits for any lean times that may come. However, this is a balancing act.
There are times when not spending money can hurt your business or even be catastrophic, such as if you ignore necessary security measures to prevent anyone from hacking into your systems or stealing customer data. Even when the consequences are not this serious, failing to make the right business investment at the right time can put you at a disadvantage compared to your competitors. Below are a few things to consider if you’re trying to decide whether it’s time to move forward in making a business investment or if you should hold off or decline to make the purchase altogether.
Solving a Problem
There are many reasons you might be tempted to spend money on something for your company, as everyone else seems to be doing it, or it’s something new and exciting. However, the bottom line needs to involve asking yourself whether or not there is a problem that needs to be solved. Be careful about this; if it’s something that you really want, you might be tempted to invent a problem to justify your expenditure. An example of solving a genuine problem might involve a situation where you’re struggling with operating costs and efficiency within your company fleet. Utilizing GPS trailer tracking can help with both of these and can save you a substantial amount of money over time.
Return on Investment
Speaking of saving money over time, this is another important aspect to look at. Sometimes, whether you are getting a return on your investment is clearer than others. The results may be very direct, showing that there will be definite savings in one or more areas. However, even when this is not the case, that doesn’t necessarily mean that the purchase will be a mistake. Sometimes, it’s a matter of looking at probability. If you are considering upgrading your security measures, you are protecting against a potential threat that may never come to pass. However, you need to look at the cost of failing to do so in a situation like this, which can be very high.
There are also expenditures that may produce difficult to quantify results. If you upgrade your customer service software to make it easier for your customers to get assistance, you might not be able to draw a direct line from this change to an increase in your profits. However, if good customer service is something that your customers value or if this department at your company has been struggling lately to meet expectations, it may be time to spend.
Tracking Your Money
For some, it may be difficult to address the above questions because they simply don’t have a good picture of their company finances. Of course, as the owner, you know what’s going on in general, but you may need to be proactive about your finances and sit down and review the books with your accountant or bookkeeper on a more granular level so that you have much more detail about what’s going out, what’s coming in and what processes might be leading to waste that could be better controlled.
Communicate with Customers and Employees
Similarly, even though this is your company, you might have less perspective than you realize on some of the challenges that your customers or employees face. There might be some friction at some point in the customer or client experience that is causing them to use your company less often. Your employees might be struggling with outdated systems or processes in ways that are affecting your bottom line, or the ability to attract and keep talented workers.
More investment in better equipment or software could change this. You may be able to look at data to help you determine where some of the issues are, but talking directly to your customers and employees is also important. You may be surprised at the insight that they can provide into investments you can make that might improve both their experiences and the overall performance of your business.
Disclaimer: This content does not necessarily represent the views of IWB.