You gotta spend money to make money.
And while this is true, it’s actually much more complicated than that. It’s not just about spending money. It’s about understanding when and where to spend money to boost your profits. When it comes to making a profit for your business, it’s not so much about about mindful spending, but about strategic spending.
Those of you who are trying to make a profit by not spending on the business, listen up! Part of embracing a culture of profit is understanding that sometimes you have to make an investment in your business.
When money is tight, it can be tough to know where to spend money and where to scrimp, so I’ve put together some guidelines for strategic spending to boost your profits:
Rule #1: Get help for the things you don’t have to do yourself.
Time is money. Yet for some reason, we have a hard time spending money when it could save us a lot of time. (And more time was the number one response when I asked what do you need to grow your business.) But if you take just one thing from this post, let it be this:
The fastest way to grow your business is to stop doing all the things that someone else could do as well as your better than you.
And the way to do this is to spend money to hire good people.
I’m actually making this my mantra for the rest of the year. I’m looking for all the opportunities to hire someone to do the things I don’t have to do so that I have more time to focus on doing the things I do best. Even though I have a basic understanding of HTML and CSS, I let Tara handle the redesign on Crafting an MBA. And I’m going to have her redesign my jewelry business site too. (She just doesn’t know it yet.)
And you’d be surprised at all the things you think only I can do this, when it fact there’s probably someone out there that can do it equally well. I make most of my jewelry by welding. And for a long time I thought, “I’ve spent years developing this skill, I can never have anyone else work on my products, no one can weld as well as I can.” And while it’s true that most people (even most trained jewelers) can’t weld as well as I can, turns out there are some people who can. One just happens to be one of my students, so I hire her to do piecework for me. (With the eventual goal of being able to bring her on as a more permanent fixture of Team Megan Auman.) And I’m looking into hiring a Virtual Assistant to handle some of the parts of my business I don’t do well and don’t enjoy. (Like managing an email marketing campaign for megan auman and cozy/cuff.)
And hiring someone doesn’t have to be a huge investment. Virtual Assistants and independent contractors can enable you to bring in help on a per project basis or for a few hours a week as needed. Giving yourself permission to outsource aspects of your business can free you up to focus on doing what you do best – being the creative visionary that drives your business. And that is money well spent.
Rule #2: Don’t spend money accumulating more supplies and materials.
My dad owns his own machine shop, so I practically grew up understanding the principles of lean manufacturing. But it’s something that we don’t talk about much in the crafts community. Likely because most crafters don’t view themselves as manufacturers. (Even though, as a friend of mine likes to say, “Manufacturing is just a fancy word for making.”) Lean manufacturing is the idea that you keep supplies and inventory to a minimum, ordering and producing in such a way that you never have much excess material or inventory on hand.
And boy, does this go against the nature of most crafters. We love the thrill of the hunt. Finding that perfect material that we just might use someday. Plenty of makers who wouldn’t dream of spending money to hire a web designer or PR agent will trot out the “gotta spend money to make money” statement to justify buying more supplies or materials. There’s a reason the biggest sellers on Etsy are the supply people.
But the accumulation of more and more materials is probably one of the biggest killers of your bottom line. Those piles of supplies and boxes of inventory are really just money that you can’t use to propel the rest of your business forward. If you feel the need to spend money on materials, focus that money on buying quality or unique materials that set your products apart. But that money spent on just buying more? That could be put to better use on a fantastic website, a new marketing campaign, or a professional looking wholesale catalog.
Rule #3: Focus on your primary revenue stream. (And be consistent.)
I am a huge fan of pursuing multiple revenue streams. But pursuing multiple revenue streams doesn’t mean each area has to bring in the same amount of money for your business. And it definitely does not mean you have to spend evenly across each revenue stream. If you’ve got a limited budget, you’ll get the most bang for your buck by focusing that money on one primary area of your business.
If you’re primary focus is online sales, invest your money in a kick-ass website, a consistent brand identity, high quality photography, a brilliant copywriter, and a marketing or SEO expert to help you drive traffic. If you love craft shows, invest your dollars in marketing and advertising in the areas where you participate in shows. If wholesale is your primary goal, don’t be afraid to invest in attending that big trade show or producing a high-caliber catalog.
Pick one revenue stream that you really want to see take off, and decide where you can spend money to drive traffic and sales. Then give yourself a few months of focus (and cash) on that one revenue stream. Stay the course, because most results aren’t instant. If you keep jumping from one area to another, you’ll never build momentum.
And even though you’re focusing on one revenue stream, at some point you can usually roll out the efforts from that spending to your other revenue streams. A consistent brand identity can carry over from your online store to your craft show booth. And a fantastic website and savvy PR agent will attract not only retail customers, but potential wholesale accounts as well.
The key to creating profit in your business is understanding when to drive growth, and when to save to keep cash in the bank. But to truly embrace the culture of profit, you have to become comfortable with the fact that sometimes you must spend money in order for your business to grow.
How strategic are you with your business spending? Where do you scrimp and where do you spend?