As cliché as it might sound, there is a lot of truth in the saying “You have to spend money to make money.”
Understandably, entrepreneurs are often looking for ways to cut costs—especially when we’re surrounded by the consumer mindset of tightening up spending, constricting, and saving.
But it’s one thing to manage your budget wisely, and another thing to refuse to spend money, even when it makes sense for your business.
When we increase spending in strategic areas, we have an opportunity to have a return on investment. And so making this transition from the consumer mindset to the business owner mindset is crucial if we want our businesses to keep going (and thrive!).
Here, we’re digging deeper into why putting on your business owner hat and adopting this investment philosophy—even when it feels uncomfortable—will set you apart from the rest.
The Consumer Mindset
The average consumer thinks in terms of pulling back their spending and saving. Now that makes sense seeing as the average consumer has a job and their income abilities are capped. They’re likely going to be making the same amount of money per month and so if they want to affect their budgets, they may need to think about constricting a little bit more.
As a business owner, it’s crucial to be aware that environmental factors can pull us back into this consumer mindset and pull us out of being the focused, confident business owner that we want to be on a daily basis.
This is especially important at a time when everyone’s talking about how expensive everything is and complaining about pricey groceries—even though the economy is technically doing pretty great.
The trouble is, consumer sentiment is often divorced from what’s really happening in the economy. Arguably more than ever before with social media and 24/7 news, consumer sentiment is driven by what other people are thinking and saying. And when you hear enough of those conversations around you, it’s enough to taint your own mindset.
Slipping back into the consumer mindset is something that will happen periodically (if not often!) throughout your business career—usually unconsciously, too. So this is really a reminder to check in with yourself to make sure that dark cloud isn’t affecting your business judgments.
Business Owner Mindset
If you’re making $10K per month as a consumer and spending $12K per month, it’s going to be hard to get out of that debt when your salary is capped. But on the other side, as a business owner, you *do* have that opportunity to make a return on your investment.
For example, if you’re investing in ad spend and you’re getting customers in, that has the potential to have a huge return on investment. There’s no limit to your customer lifetime value.
Being hyper-focused on making sales is especially important when the economy is a little weird. Scaling back spending is not going to be what saves us. Because as we scale back spending, that generally means that we make fewer sales. And as we make fewer sales, we have to scale back our spending even more, and it becomes a vicious cycle.
Sometimes I talk to business owners and they’ll say, “Oh, I really want to invest in XYZ program to help me make more sales because I’m not making the sales that I want to.” The problem is, if this program is going to help you make more sales and you’re not currently making those sales, your current path is to continue not making enough sales.
The consumer mindset would be to save up for this program—but remember they have a salary coming in. As a business owner, if you are not making sales at the rate that you need to be making sales and you have the opportunity to do so by making an investment, you have to make that investment. Why? Because your current path will never get you to the point where you will be able to make that investment.
Yes, is there an inherent risk to making the investment, but you’re being strategic about it. You’re not investing in things that you don’t think will have a true impact on your business, you’re investing in things that have a direct line (or at least a very strong dotted line!) to your bottom line.
Fundamentally, as business owners, we don’t have the luxury of staying stagnant. Circumstances are always changing, whether it’s a new social media channel coming out, wars breaking out, or pandemics—there’s so much happening in the world that can impact our businesses.
We know that the vast majority of small businesses drive themselves out of business by doing things the way that they’ve always done them, without changing up tactics, revising their methodology, or making key investments.
Investments vs Purchases
Consumers tend to use these terms interchangeably, so let’s first get clear on the difference between the two. A purchase is something that you buy once and it doesn’t earn you anything back. For example, you could buy a nice coat for $500 but you will never get that $500 back. Consumers might say they are “investing” in this statement piece because it’s higher quality but the reality is that it’s still a purchase because it’s not going to give anything back to you.
Whereas an investment is something where you put money into it with the intention and expectation that it’s going to get you returns back. Investments in a business can be in courses and programs, but also in employees or team members.
A common mistake by business owners when deciding if it’s the right time to hire, is thinking you have to make money first to pay for a new role. That kind of thinking is driven entirely by the consumer mindset. In order to make that money, you need to bring that person in to take things off your plate so that you can then earn more money.
Investing Enough Money to See a Return
Way back toward the beginning of my business, they used to say you can run a business spending just 10 bucks a day on Facebook ads. And so I thought “Okay, I can spend 10 bucks a day on ads”, without actually figuring out any of the key metrics I needed to know to run Meta ads.
But to break through, your investment has to be meaningful enough to give enough opportunity for people to make a purchase. If you’re running that 10 bucks a day, you might not get anyone in a day for 10 bucks. And it makes sense that the knee-jerk reaction would be to reign in spending when returns are lackluster. Why continue—or even increase—spending on ads if it’s not driving positive results?
But the answer is because you’re likely not spending enough to get the returns you want. In fact, Nielsen’s recent ROI report showed that 50% of marketers’ media investments are actually too low to drive maximum payback, which means you’re not spending enough to have those returns or at least to maximize the opportunity that’s there.
Pushing Out of Your Comfort Zone
I hope it’s very clear that we’re by no means encouraging you to throw money around haphazardly! That’s obviously not how a responsible business owner operates. But I do understand the uncomfortable nature of making investments in your business.
There have certainly been investments that I have made in myself and the business that were bigger than I had ever made before. Did it make me nervous? Certainly. But I also had a very good expectation of what I would get as the outcome.
We’re still human. I wouldn’t expect you to have total confidence as you upload your ads or hit “purchase” on a new program. But feeling those nerves, thinking through everything very judiciously, and still making the investment anyway, is what separates you from a consumer and from an unsuccessful business owner.
And don’t forget if your business is brand new or relatively new, you might need to spend more than someone who’s been around for a while just by virtue that people don’t know you. They don’t know about your program. They haven’t heard your name before. And so there might be more of an initial upfront investment but as you become more established, more people may come in than before at that same investment level.
Making the concerted effort to be in the business owner mindset versus the consumer mindset is certainly not easy, especially because the consumer mindset is what you hear everywhere.
It’s what you hear on the news, it’s what you hear your friends talking about, and it might even be how you need to act in your consumer life versus your business life.
But for your business, you have to think and you have to operate differently. You have to think and operate as a business, not as a consumer. So put yourself in rooms with other business owners who are thinking like business owners because we don’t have the luxury to sit back and wait. If we want our businesses to keep going and succeed, we have to be proactive and take advantage of opportunities.
Read More
In this blog post, we share the benefits of digging into your data—something that will help your investments start to feel a lot less risky.
Watch More
In this Energize Your Online Business podcast episode, Nicki and Kate explain why putting on your business owner hat and making strategic investments—even when it feels uncomfortable—will set you apart from the rest.
Your Turn!
What investments are you making (or planning to make!) in your business? Let us know in the comments below!