What’s the difference between investing in your business and just spending money? I’ll review Daymond on Demand principles for brand growth and maintenance.
* This post is not affiliated with Daymond on Demand–reviews and opinions in this piece are the writer’s alone.
If you’re a new entrepreneur – or even if you’re not – you’ve probably heard the old maxim “you have to spend money to make money.” This is true in essence, and it’s the fundamental principle behind the concept of investment, but how do you know when you are investing money and when you are merely spending it? What is the distinction?
Daymond on Demand Reviews: Investing Vs. Spending
Firstly, let me just say that a few of my views were shaped by my experience with courses from Daymond on Demand. Reviews of the training are generally positive, but I’d still like to address a few concepts in a bit more depth. The concept of investment, for example, is a challenge to many new entrepreneurs, largely because most entrepreneurs don’t have unlimited assets. But when we’re new to operating a business, we don’t immediately recognize or adopt the best approaches, which can lead to serious miscalculations. Our outgoing funds aren’t necessarily strategically channeled, even though we may believe we’re spending for the long term.
This is because even though both spending and investing involve committing funds in exchange for a product or service, the two concepts are fundamentally different. When you spend, you purchase a product or service whose benefits don’t necessary extend beyond the basic purpose or utility of that product or service. When you invest, however, you do so expecting the transaction to lead to additional, calculable returns. You are building – as opposed to sustaining – your brand. Expenses maintain your business; investments grow it.
Unfortunately, many entrepreneurs believe they are investing when they are actually spending, and severely misallocate their funds. Here are two ways to know if the money you’re spending is really an investment.
- Are you adding value? The concept of “adding value” isn’t as straightforward as one might think. To some, “adding value” may be making personal cosmetic improvements, like having their teeth whitened, or going to a medspa. However, these improvements may only add prestige; you only truly add value when you give yourself an advantage that leads to the market as a whole valuing your services or product above your competitors. Expertise, certifications, and advanced degrees are examples of investments.
- Will you be able to do something you couldn’t otherwise do, and will that ability lead to direct growth? Once you commit funds to additional resources, those resources should allow you to increase your revenue stream in a direct and measurable manner. For example, acquiring additional physical locations to increase your customer reach and cash flow is an investment; hiring a landscape service for those locations is an expense.
Keep in mind: not every investment will yield dividends. Sometimes the most careful and strategic planning doesn’t generate returns. Conversely, sometimes spending money does lead to making money – a lobby redesign can cause customers to enjoy visiting your business, which leads to positive online reviews and more customers.
Doubtless, the lines occasionally will get blurry. However, it is critically important to know that there is a difference between spending for growth and spending for maintenance. Recognizing the distinctions can help you make sound financial decisions for the life of your brand.
