Money doesn’t go far in small business. Should we spend more on marketing communications? Buy a new laptop, desktop, tablet, smartphone, or camera? Upgrade our website, CRM, billing system, cloud storage, phone or Internet services? Hire a new sales, customer service, or finance person? Enhance employee benefits? Create new products? And so on.
Each opportunity to spend money creates another analysis: outflow of hard earned cash versus benefit to the company. The expenditures can ultimately be prioritized that way, which helps reduce the pressure on the entrepreneur. You simply cannot do it all!
Assuming your products or services already meet the target market needs, I suggest starting the prioritization process by examining your revenue outlook. Do you have enough prospects in the pipeline every month with your existing sales and marketing activities to spend money elsewhere? Then examine your customer retention rates. Are you keeping your customers? If not, why not? Fix that. Take care of revenue, then work on the rest.
Next examine which operational enhancements would have the greatest impact on the business. Cash flow tops the list. After 5 years of doubling revenue, my very smart accountant told me that I was going to “grow myself out of business.” Revenue has to be sold, invoiced and then collected! Upgrade your financial systems, hire the finance person, but make sure the money comes in the door.
Now that you know your revenue outlook is rosy and the money will be in your bank account in time to pay your bills, let’s look at other important investments.
- Spend money to increase efficiency and lower your costs to improve your profit margins.
- Retain great employees with higher wages, more benefits, bonuses, team building sessions, new equipment, or more perks.
- Develop new products to dazzle your target market and make current and future employees want to work with you.
Spending money in the wrong order can be terribly painful. Entrepreneurs are wonderful idea people. Spending money on a new idea without shoring up revenue from the existing business is a common urge, and can cause serious financial issues down the line.
All the best!