How to Invest in Your Business
The Pink Floyd song famously says, “Money/It’s a gas/Grab that cash with both hands and make a stash.” And you’ve probably heard these business phrases before:
- Money is the lifeblood of your business.
- Cash is king.
- Top line is vanity, bottom line is sanity.
Yet, many businesses in this industry struggle unnecessarily because their thinking and relationship with money are off track. This article is about how you use money, as well as how to turn around and invest back into your business for better growth.
Get Your Money Upfront
While we can all bemoan the struggle we’ve faced coming out of COVID, one positive result has been this industry’s renewed focus on money. The shops that had unwieldy accounts receivable problems did not make it. The ones that scaled up during this time were the ones that had a better understanding of cash flow and a solid financial foundation.
Typically, one thing made the difference.
Get 100% of the money for an order upfront. Not 50/50. Not Net30 or even Net10. COVID taught this industry that being financially strong matters.
If you read this article and learn only one thing, this is the policy to adopt. Get paid upfront for the work you do. The more we move to this as an industry standard, the easier it will be for everyone else.
You can’t buy a plane ticket with a PO or have your credit card charged when you land. Huge players like Amazon and Custom Ink charge upfront. You are not a bank, so stop lending money.
Why This Matters
It will be nearly impossible to invest in your business if you are always chasing money. You can’t get to the “how” until you have the funding in place.
So, let’s say that you have accomplished this goal. Good for you!
The next step is to start taking a percentage out of every order and funding a savings account for your business. Start with something small, like 1%. Make this an automatic process, which should go into a separate designated account. Then, work up to higher percentages based on your needs and comfort level. Want to learn more? Check out Mike Micholowicz’s book, “Profit First.”
Let’s get something out of the way here. So many shop owners have told me they take their profits and reinvest them back into the business. Don’t do that. Your profit and your business investment should be different ideas.
It would help if you did both. Take your profit. After all, that’s why you are in business, right? Also, invest in your business. Plan and strategize on both.
Define Investment
Next, let’s work on defining what exactly is an investment in your business. Which one of these is an investment in the business, and which ones are not:
- Revamping the website
- Training employees
- Attending a trade show
- Buying a building for the shop
- Purchasing equipment
- Hiring employees
- Joining a mastermind group
- Purchasing better software
This is a trick question because all of these could be an investment that is right for you if the money is spent that improves productivity, profitability, or competitiveness. Of course, that list could be much longer, but you get the idea.
The idea of an investment is that you take a chunk of money and do something with it to improve your business. What I want you to think about is what will be the most effective use of that money.
Some considerations:
Save Time – Time is a commodity that you can’t get back. So, anything that improves how your employees or equipment use time can be a worthwhile investment.
This could be in some new equipment that allows you to get more produced an hour. Some software automatically handles tasks for you, so you don’t have to do them manually. A larger space allows you to move around freely and have room to work without moving things around.
One way to look at the notion of time is what something costs you per hour to do. Can you use that number to help justify an annualized savings?
Reduced Labor – This one is easier to grasp, as we’ve seen the difference between what an automatic screen-printing press can churn out as opposed to a manual setup. In another example, a 12-head embroidery machine can generate more finished products than a single-head.
A website that automatically pushes order information into your shop’s operating system so a person doesn’t have to enter anything manually is always fantastic.
Build Value – Another idea is building long-term value. This could be in the form of real estate. But it could also be about intellectual property too.
For example, investing in building your own apparel brand could pay off if you sell it a few years later. You own all the tools; why not become your own customer and build something you can market?
Some shops with a more entrepreneurial spirit also think about building innovations for the industry or tools they can use. It is not uncommon for someone to patent an idea. That is an investment in time and treasure that could also pay off.
Training – Let’s face it, anything that we can do to elevate the performance of the staff members on our team has huge dividends down the road. Yet, many business owners in the industry do not see training as an investment. Training is typically lower down on the needs list until there is a challenge that can’t be solved. Then, it becomes an emergency.
Invest in your people!
Quality – An interesting standpoint on quality is the idea of improving it. Not just with the final product but in the processes involved in making something.
For example, an improvement in the quality of the art could significantly impact sales. Better art equals more orders usually. Yet, dumbing down the creative process and trying to save money on using the same templated graphic arts services is commonplace.
A tremendous amount of value is placed on the printing presses in screen printing. But not much discussion happens where it matters, which is in the screen room. I can wholeheartedly champion any improvement in ramping up the quality of the screens that your shop will use for printing. But usually, that is the last place any investment dollars are spent. It’s just not flashy enough.
Investment Strategies and Thinking
Let’s say you have $100, or $1,000, or $10,000, or $100,000 to invest in your business to improve it. What are you doing with the money?
You could spend it any number of ways. Still, I would argue that you should consider the effectiveness of your investment first. What will make the most significant impact on the amount of money you spend? What do you need the most? What’s broken or not working as it should be? How can you take that cash and put it to best use?
Many shops only think about shiny new equipment purchases. It’s great to get that new chunk of printing or embroidery technology, but does your website look like something out of 1994? How many more sales would you get a year if you focused on automating that activity with a better sales platform and UX design?
Let’s not forget about employee training. Be realistic. Do you have a group of highly trained, world-class staff members that crush it every day? What skills are you lacking in art, sales, production, operations, accounting, or leadership that could significantly impact your results?
Again, let’s focus on the punch that the dollars you spend can have on your business.
Begin With the End in Mind
There are multiple ways you can invest in your shop. For the sake of discussion, let’s say you pick one or two to target. What’s next?
Simple. With clarity, can you write down the intended results you should be getting however you spend your effort and money? What do you want?
Can you measure that result? Where are you now?
When you think about the results you are trying to achieve, be sure that you can measure what you are doing somehow. When you see your numbers and results improving, this is how you can evaluate your progress.
Nobody spends the money, and then, “Bam!” instant results magically appear. Better things happen with consistent effort. You must put in the work. When you fail, dust yourself off and try again. When you succeed, determine how that happens and then ensure that you don’t take a step backward.
Your preparation determines your outcome.