What is the most important thing that can shut down entrepreneurs’ work in a moment?
Simple! It is called as “Money”.
The day money is over, the business shuts down. Still not many give a thought to money management though.
Money must be spent. If your main business is graphic design, you cannot deliver without buying the right software. That is initial investment. Even though that is also an expense, it is termed as an investment because it earns revenue. Though I would not classify every expense as investment. If you buy shiny new furniture and it does not contribute to the revenue, it is an expense rather than investment. If you are running a campaign to showcase your product and also breaking the bank, it would again be an expense rather than investment.
That is where expense differs from investment. Investment can always be counted to produce tangible returns. Thus a software that saves time is a better investment than a furniture that looks good .
In dotcom era , a lot of start-ups took money from the venture capitalists and splurged on lavish office furnishings, which could have gone into business development. Most of those start-ups burnt cash faster than they could generate revenue.They had a lot of cash in hand and all they did was creating expenses leading to “dotcom bust”.
The important thing is not only about keeping unwanted expenses in check. It is about thinking and knowing if an expense is adding value to the overall objective of business. For example, creating a brochure for showcasing a product is good idea but using glossy paper on which to print information is probably not ( unless required by business ) .
So before you go and make that expense , consider if it is really an investment for your future growth or will it set you back and offer no meaningful return. Knowing the difference between investment and just expenses can make or break a business.
“Image courtesy of [jannoon028] / FreeDigitalPhotos.net“.