3 Ways to Make Investing in Your Business (and Yourself) Less Risky

December 7, 2021
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Five years ago, I received a life-changing letter, which was going to require a life-changing sum of money. I’d been admitted to my dream master’s program in Paris. I wasn’t some young buck(ette). I was 33 and had a strong, financially successful career. BUT this opportunity required that I write a check for $100,000 to seize it. I don’t know about you, but I had never come close to spending that amount of money on anything.

Yet scary as that six-figure number seemed, strangely, I didn’t feel concerned. I shared the information with my husband and sealed the deal with this clear-as-a-bell statement, “I know that this is an impactful amount of money, but it will pay us back. I make an excellent return on investment.”

As a small business owner myself—and an advisor to other small business owners—I really do understand how scary it is to spend a significant amount of money and take a chance on something or someone. You may be facing a decision like the one I mentioned, investing in yourself via school, a course, or coaching. It may be a question of hiring someone to begin growing your business beyond yourself, or it could be more traditional investments like equipment or real estate. The decision to hit the go button is extremely nerve-wracking because we’re all bound to make a bad investment at some point (raises hand).

So the question becomes how can we make investing less risky and a little more… sure? Ask yourself these three questions.

1. Is this the thing my business needs to get me to my next goal?

All the time, we see business owners invest in things they think they need because it’s what other people are doing. Common perpetrators include spending money on social media, (re)branding, rent, and hiring too early (or the wrong person/ wrong position).

Just like a yoga teacher may say, “Don’t worry about the fancy poses other students are doing; keep your eyes on your own mat,” we say the same to our clients. Think about it, 80% of small businesses don’t make it past 5 years! So why would you default to doing what others around you are, when 4 of 5 of them won’t be around soon?

Instead, get crystal clear about what your goals are. Then, make sure that you’re investing money, time, and energy moving (at least) one step closer to them.

2. What’s the (super-simplified) return on investment?

You can do this by answering the question, “Will this investment make me at least as much money as I spend on it?” In other words, is the money this will generate greater than what I will spend on it? How much precisely, and how long will it take?

In the (admittedly extreme) example of my graduate school tuition, I knew that although over a long time horizon, the prestigious program I was entering would give me the tools, freedom, and global opportunities to make back $100K, 100 fold. Probably more like 1,000 fold one day. (If you do the math, it’s a bold statement, I know). I can wait it out for the long game, as in advance, I’d set myself up financially to wait for the return. Starting with one to three years is usually a good rule of thumb. Will the ROI come within one to three years?

Simply running the math distills feelings into black and white facts, and we preach that small business owners absolutely should weigh the facts and the feelings. So speaking of feelings…

3. Will it alleviate headspace?

I love numbers (I know, I know, not typical for a small business owner). In fact, I used to make investment decisions solely on the numbers. Then this year, I entered a new phase of business and money mindset, where I added a new variable into my ROI calculation: headspace. If something is draining my headspace, making me feel scattered, or distracting me from more important work, it’s worth an investment. It may be outsourcing work or simply outsourcing worry. One of our most important hires this year came about because of that very fact, and I’ll be investing in another couple of hires in 2022 to free up even more headspace.

We have found that, hands-down, the best investments that small business owners make are in accountability, education, and hiring.

Those who have accountability built into their personal or professional development systems are 95% likely to reach their goals. 95%! So that will always be your best investment. Next, if you have the resource (perhaps through a coach or advisor) to identify obstacles on the path to your goal, invest in education or consulting to close the gap. Then, that will put you in a position so that your insides are fully optimized, and you’re ready to hire or outsource.

What’s the common denominator among these three best-bet investments? They’re not things. Not physical assets. They’re investments in real-life people. For, as the African proverb says, “If you want to go fast, go alone. If you want to go far, go together.”

People are risky, it’s absolutely true. But there’s no other asset in the world that can create chemistry, connections, knowledge, and scale. Humans are behind it all. So when you’re questioning that next investment, go with your gut and run the numbers. Ask yourself these three questions to decrease your risk and reinvest in your business. Reinvest in you.

“Hands-down, the best investments that small business owners make are in accountability, education, and hiring.”

Image: Courtesy of Julie Sellers

About the author: Julie Sellers is a Nashville-based business advisor to creative entrepreneurs.  Her firm, Ellevated Outcomes, grows small businesses with integrity, helping entrepreneurs step off the hamster wheel and get to the next level. Visit their website to sign up for a free infographic, to help you achieve more money and meaning.

Featured image: Smith House Photo

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