Technology:
Even with its rapidly changing and evolving application platforms, when thought through strategically, technology can be an investment that pays your business back in a multitude of ways. A business owner should continuously be considering how technology can help the business perform better, be more efficient or allow its people to focus on more income-generating and income-producing aspects of the business. Too often the “expense” of technology clouds an owner’s perspective on what the technology can ultimately do for the business in the long term.
Example: A custom cabinetry business owner saw his business begin to explode in inquiries and opportunities to bid on projects as a subcontractor to primary contractors serving government construction projects. Even working 16-hour days, he could not keep up with the demand for estimates of new projects along with oversight of projects already under way. Numerous bid deadlines were missed. After lamenting the expense of an estimating software program that would require a GHS 2,000 investment, he deemed it an investment he needed to make. Not only did it enable him to estimate jobs at the click of a mouse, it also reduced his hours-per-day worked so he could invest the time in other ways. Jobs are streaming in vs. just inquiries.
Physical location:
Being home-based saves on overhead expenses and can be an excellent tax write-off. This can allow you to put your cedis in other areas of investment that make better sense. An office presence, however, can be a smart investment depending on your business’s growth model. If you need a space to present the appropriate image or to accommodate workers or meetings with clients, you may have to consider a location outside the home. Later, as your business grows and continues to expand in a rented space, a mortgage might become a better alternative than leasing because the property would be an investment and a tangible asset both for the business and for you as the business owner.
Example: A custom home builder was in the midst of expanding with an impressive stand-alone commercial office and showroom. The new facility was still several months from completion when his current leased space came up for renewal. With no option to go month-to-month, the owner leased a temporary, low-rent warehouse unit to curtail expenses until his new space was ready to be occupied. Shortly thereafter, rumors began to spread that his business was in trouble.
With the help of a consultant, the owner realized that his expense mentality was the culprit, so he made two critical changes that set the record straight. He invested in under-construction signage to make passers-by on the busy highway aware of his new facility. He then moved from the low-rent warehouse space into one of the spec homes he was building, temporarily outfitting the garage into a complete office and showroom welcome center. These location moves immediately squelched the rumors and brought positive attention to his business’s expansion in the community.
Hiring:
One of the toughest hurdles for many business owners to clear is hiring the first couple of people. That’s because the positions are viewed as an overhead expense rather than an investment. You need to factor your time into the equation. Before the first hire, the business owner’s time is typically being monopolized by necessary but non-income-generating activities. The next hire typically is needed because enough time is being devoted to one particular business activity to warrant putting someone in charge of that activity. The bottom line in either case is to hire in order to grow to the next level. If no one is available to do what needs to be done, it won’t get done. Period.
Example: Co-owners of a language services company were feeling the pinch of the economy in early this year as contracts began to be delayed and put on indefinite hold. The company’s growth plan was set for hiring a key administrative position to support the owners. With the economy affecting sales coming in, it was all the more imperative for one of the owners to be able to target and market the business more aggressively while the other oversaw the work and kept it moving for clients. The owners determined that hiring an administrative assistant was critical to enable one co-owner to focus on income-generating activity and the other to focus on income-producing activity.
Once you make up your mind to understand and know the difference between a true expense and an investment, you could be among the businesses that not only survive but thrive in this and future economies.
Ask Yourself
Use these statements to assess if what you are considering is a justifiable investment. If you can answer yes to one or more of these, then what you are considering is an investment, not an expense.
Measurement:
• Can be directly measured for increased productivity in an area of the business
• Can be directly measured for greater efficiencies in a process or the business overall
• Can be directly measured for increased profitability of products or services
• Can be directly measured for increased sales in business
• Can recoup and realize a financial gain as a result of the monies spent
Enhancements:
• Will allow time for more income-generating or income-producing activity
• Will improve individual, team or customer-service performance
• Will enhance, reinforce or protect the company image
• Will add credibility or capability, which can be promoted
• Will aid in distinguishing the company against competitors
Example: An attorney was frustrated, believing she had reached capacity in the hours she could bill per week due to the time necessary to manage and run her practice. In addition, she and her husband were planning to have a family soon, so she did not want to get into a habit of working more hours to increase her billable hours. A consultant suggested she track and document all of her time, including the non-billable hours, without changing her work routine. After four weeks of tracking hours, tasks equaling 10 to 15 hours per week were identified as activities that could be given to a strong office assistant.
The expense of hiring and paying someone else on a weekly basis had kept the attorney from considering adding any support position. However, when it was pointed out that the additional 10 to 15 hours could be converted to billable hours, she determined to bring someone on board for 10 hours per week as a test. Within one month, the assistant’s hours were increased to 25 hours per week. She had also proved valuable in research support, also a billable activity. The end result was an increase in the attorney’s billable hours per week by 25 percent to 35 percent without increasing her overall hours worked. The administrative assistant generated enough billable activity to pay her weekly salary, plus add more profit to the firm’s bottom line.
Author: Gabriel Ofori Yeboah
Fund Manager, Investor, Broker, FX Trader, Consultant–(Investment, Financial Analyst, Banking) and CEO & FOUNDER–GOY FINANCIAL SOLUTIONS
Email: gabbynanaoforiyeboah@gmail.com Tel: 0246751535
