How to Navigate Planning for that Next Investment or Team Hire

The poor college kid stereotype exists for a reason. Even students who are lucky enough to have their parents covering tuition expenses typically have a small enough income that learning to budget is a necessity, not a choice. For my husband and I, things got really tight our last year of college. We got married the summer leading into our senior year of college. In our last semester, he was in a bike accident and ended up with a pretty bad concussion that prevented him from doing pretty much anything for school, let alone for work. We were living off of a small allowance my parents were generous enough to give and the income from my two part-time jobs (meaning we ate a lot of beans and rice.) It was enough, but it was tight. We had to be intentional about how we spent our money. The same is true when it comes to budgeting for your business.

The truth is, a small business is almost always in a state of growth or a state of plateau. Either things are expanding, you’re taking on new clients, trying to increase your marketing, or improve any of the other thousands of moving parts within your business, or you’re in a comfortable place where you have enough work & revenue to coast a little as you prepare for your next period of growth. In both cases, you need to be careful when making financial decisions. You need to invest in your business, but how do you decide where? And how much? And when???

An Investment in your Business

Let’s start by clearly defining what we mean when we say “an investment in your business”. We aren’t talking about buying that fancy Swedish office chair you saw on TikTok (even though you probably could use that as a tax write off 😉). In this context, an investment in your business is a BIG purchase. New software, updated branding, a new team member, a business trip, strategic consulting, systems set-up and optimization, and the like. The sort of purchases that can cost you thousands, sometimes tens of thousands (scary!). 

You’ll know you need to invest in one of these things when:

1. You want to grow a specific area of your business with intention.
2. A specific area of your business is growing already and beginning to overwhelm you.

Regardless of whether you’re in scenario one or two, it’s clear you’ll need to make a big investment. But can you afford to?

Affordability and Returns on Investments

Typically when you’re investing in a costly service like a full rebrand, systems development, etc., you don’t want to only prepare to save enough money to afford the exact cost. Rather, you want to save almost twice as much as you expect it to cost. This lets you prepare for any unexpected additional costs that come with the implementation of the services, potentially lower sales as you shift some focus towards working on business development, and, in the worst case scenario, if the person you hire to help does a poor job. But it isn’t only about if you have enough to pay for the service up front – you need to know if the service is going to pay for itself in the long run. After all, you’re investing in this to save yourself time and money in the future.

This is when calculating an ROI (return on investment) comes in. If you know you have the cash flow for a big investment and know your business would benefit from this investment, you need to make sure the benefit outweighs the cost. If it doesn’t, this purchase probably isn’t worth it. 

Prioritizing Investments When You Have Options

This is especially important when you need several things done but only have the time or money to focus on one aspect of your business; if option A costs $15,000 and will lead to a return of $25,000 over the next few years, and option B costs $20,000 and will lead to a return of $30,000 over the next several years, option B is the better long-term investment even though it costs more now. However, if what option A provides is more crucial to your business at the moment, option A is the investment that should take priority.

This can be a lot of math, and a bit confusing for anyone who hasn’t had access to a financial planning template for businesses before, especially when it comes to calculating ROI and comparing it across different options. Every small business owner should feel as confident as possible when making big financial decisions; after all, an investment in your business is an investment in your future. That’s why Upwell offers a Team Growth & Investment Planning spreadsheet you can get here, so you can access the tools you need to feel secure in your lifestyle & business.