Are you being penny wise pound foolish?

One of the greatest lessons I learned from working for large organizations is how to multiply money or, better said, how to use the money to create more money and wealth.

Large organisations didn’t just become large overnight; it took them years of hard and smart work. They had a clear vision of where they wanted to go, what their goals were and did one thing that made them grow.

Large organisations  not only spend money on a day to day activities necessary to keep things going, more importantly, they INVEST money wisely in order to grow. Some of them invest in their employees, others in machinery/equipment and automation. Whatever their investment choice, they all invest money in order to grow.

How can you invest in your own business?
Before answering this question, we first need to go one step back and clarify one big mistake many entrepreneurs make. What I often see entrepreneurs do, is that they try to save money by cutting down their costs (which can be  a very good thing to do) but while doing so, they also cut down completely on their investments. Worse yet, some don’t even think about investing in their own business.   They are actually being penny wise pound foolish.

As you see, there is a big difference between costs and investments.

The biggest difference between costs and investments is that the aim of investing is to create more money.

If you invest  1 Euro,- you want and expect that Euro, to return into more than that. This is called the Return on Investment.

Therefore, it is very important to have a clear mission for each Euro spent. When you send that Euro off to work, you need to tell Mr. or Mrs. EURO what its mission is: to come back as a 10 Euro.

So where do you start?

1. Have an investment purpose

What do you want to achieve with your investment?

2. Decide on your investment budget

How much money are you willing and able to invest in order to achieve you investment purpose?

It could be that your initial budget is not sufficient for the purpose you want to achieve.

You can decide to break down your purpose into smaller projects. The important thing is to make invest money in your business a habit.

3. Decide on what the best way is to invest this amount in. It could be in things like:

• Invest in People/team
• Invest in automation
• Invest in equipment
• Invest in marketing
• Invest in education

4. What is the Return on Investment you expect?

The Return on Investment can be in terms of extra income or extra time or more productivity. When you use the extra time wisely you can be able to create extra income (you now have more time to work on your business, to serve more clients)

To give you an example of my personal experience: My partner and I used to work from home. Our office was our kitchen table. When we had our first child it became very difficult to work and fully concentrate at home. We were not being very productive.

We then decided to have an office space outside from home, yet not very far away. We set our budget on a max. of € 250 (Euro) per month. Our search started and we told this to all our friends and family.

Within a few weeks, we found a 30m2 office space that fitted our budget, fifteen minutes’ drive from our home.

It does “cost” us € 250 a month; however we are much more productive.

My partner now is able to have clients come for treatments to the office (which was not possible at home). This generates much more income.

By investing this € 250 we now have an extra inflow of money (more clients) which we otherwise wouldn’t have had if we stayed working at home and “saving” us the €250.

Where do I get the money to invest?

One of the obstacles I frequently hear from entrepreneurs who are aware of the need to invest, is “Where do I get the money to invest?”   A legitimate question!

In next week’s blog, I will show you how some women entrepreneurs who had no money at all,  managed to come with the necessary amount of money (and some even much more than they had hoped for) in order to invest in their company. If they can do it, I am absolutely sure you will be able to do it too.

Until next week!

XS