Affordability Mindset Vs Investment Mindset
The more time I spend online in entrepreneur and business start-up groups, the more I see the topic of investing in yourself pop up. At the crux of the conversation is often whether or not people feel coaches, education and even administrative assistance is worth it. If you look at the answers, you see two different mindsets emerge: the affordability mindset and the investment mindset.
Learning to know when to say, “I’ll do that for my business when I can afford it,” versus, “This investment will take my business from earning X to earning Y in Z time” is critical. Everyone has a tendency to do one or the other: wait or jump. Being able to fully understand when to hold back and when to pull the trigger is what the most successful business owners and entrepreneurs do every single day.
The Affordability Mindset
The Affordability Mindset takes the approach of saving until the point you have the money to do it. Someone doesn’t want to open the wallet up and pay for something until they have the cash in hand to do so. In the world of credit overextension, I fully understand the prudence in not spending what you don’t have. However, in the business world this is not exactly the entrepreneur’s mindset.
Consider the example of enrolling in a new coaching program that costs $1,000. A young business could be struggling to stay in the black every month. The idea is that money might be better spent on direct operations and marketing, especially if you don’t have that cash sitting around. It’s a chunk of change for anyone building a business and shouldn’t be thrown around whimsically.
The Investment Mindset
The investment Mindset looks deeper at where the money is going to be spent and then works at doing the math to define how long before the investment pays for itself. The investment mindset is at the heart of every entrepreneur who understands that part of the long-term success formula means betting on things early on.
Consider hiring a virtual assistant for 10 hours a week. If paying someone $200-$300 a week to handle social media and schedule coordination frees you up to do more networking, marketing and internal development, you could see your business grow must faster. Let’s face it, there are things all of us don’t like to do in our own businesses but feel we need to just to save some money. The reality is it often takes us longer than necessary and drains our energy.
Where On The Scale Are You?
Don’t misconstrue what I’m saying by defining the mindset. Every business owner out there takes some sort of risk and with a few who can build something without any financial investment, have invested in their own future. Even quitting a job to go full time into your own venture is a financial risk. And entrepreneurs still need to have the prudence to be financially responsible.
It really becomes a scale with Affordability Mindset being on one end and Investment Mindset being on the other. Each business owner and entrepreneur should really evaluate where they are on the scale with their natural tendencies. It’s important to have this self-awareness so you can make better long-term business decisions.
A Big Money Example
I was told a story once by a friend with insight into Rupert Murdoch’s use of the corporate jet that really stuck with me. Years ago, the media mogul’s corporation was having financial difficulties. This would seem like the time to be frugal with money. Instead, the company jet use was more active than it had been as Murdoch traveled the globe for meetings to make new deals for his empire. The investment and risk transformed his holdings and turned the company around.
Of course, we all aren’t on the same level as a man who has a $50,000,000 jet. But when you scale it all down, is that investment into yourself or your business going to transform everything you are doing?
It’s a risk, no question.
When and What to Invest In
Every business needs some level of prudence when making big financial decisions and sometimes you just need to jump in and take the risk. This is the hard part for people new to business ownership and entrepreneurship. Learning to know when to jump in and when to hold is part experience, part gut-feeling and part understanding the end-goal.
With the rise of solopreneurs, there has been an exponential rise in business coaches because new business owners have questions, sometimes confidence issues and seek mentors. But if you aren’t committed to the work or advice a coach gives, then the expense isn’t worth it. The same is true with online classes and workshops. There is no magic pill to success.
Simply put: an investment into a class, coach or program is not always an investment into yourself or your business.
Self-Awareness is Critical
Business owners and entrepreneurs can easily fall into shiny object syndrome chasing the next best way to grow their business. There are a lot of great programs out there but a business owner should really think about what his business needs. When looking at different investment options for your company, you need to know what your company needs.
The critical question boils down to this: does this investment help me work on my business rather than in my business?
Someone new to business or a specific industry might need knowledge specific to that industry. A class or coach could save a lot of time in the learning curve to get the business humming. Someone with a lot of industry experience might need administrative or marketing help to ease the burden. Whatever you choose to invest in should translate to dollars. Everything else should be purchased on the affordability scale.
An Example of Investment Consideration
For example, you can open an e-commerce store for next to nothing. In fact, you can probably do it for nothing with free websites on WordPress, free shopping carts with WooCommerce and dropshipping with AliExpress. But there are a million e-commerce stores out there. Your option is to slowly build a following using sweat equity marketing or to invest in social media ads or other content marketing programs.
Look at what you are currently doing in terms of customer traffic and sales. Then do the math. Say you have 100 visitors to your website monthly and it’s taken 3 months to get there. If you invest $500 with targeted traffic, what is the expectation? Facebook will tell you the target group demographics and numbers.
Then consider the number of sales and profit you are currently getting for 100 visitors. If that $500 got you 1,000 new views in a month with the same type of conversion rate, would the profit exceed the $500? That typically is a jump in a situation where the risk is worth exploring because the probability is in your favor.
Every successful business person will tell you there was a lot to learn and often many mistakes along the way. Investing in coaches and classes can help reduce the long-term costs of not knowing something. At the same time, making sure you aren’t just throwing good money after bad for things that are pretty and shiny but not helping is important for long-term business health.