Investment and Expense
Being able to tell and investment from an expense is critical to business success. Investment is spending resources based on anticipated long term results, and requires a future based decision. Expense is spending resources for immediate gratification, and results from a present based decision. Those resources you spend can be one of three things: time, money, or talent. When you eat a protein bar, that’s a future based decision: you’re investing in your health. But when you eat an ice cream bar, that’s a present based decision resulting in instant gratification. If you are making a lot of present based decisions that result in expense, your future will be limited.
Understanding Investment and Expense Changed Our Story
Back in 1992, Dawn and I were in desperate straits. We were $350,000 in medical debt, our house was in foreclosure, and I was making $20,000 a year coaching football. We were about to lose everything. So we started an Amway business, knowing nothing about it. Since we didn’t have a business background, we studied the successful people around us to figure out what they were investing in. The highest-achieving people in the company spent time and money on books, tapes, and training seminars, so we did, too. I saved money for tapes by cutting my son’s hair with dog clippers! If you think that sounds cruel, it’s not. It was a sacrifice that paid off later, when we were debt-free and our children attended private schools.
Years later, after we had built a successful Amway business, we switched into the realm of training and coaching. We converted a room in our home into a studio office, where we can meet with private clients. This required some expenditures, and consequently, we didn’t take a vacation that year. But the next year, one month’s use of that studio office paid our mortgage for the entire year. That was a future based decision! If you think that was extreme, it wasn’t. We chose to invest money into our future, rather than spend it on present day gratification.
Investment and expense in business – ROI
It’s time to identify investment and expense in your budget. When money leaves your account, is it an investment or an expense? You can tell which is which by examining what you get back. If you get something long term back for your money, you have received a return on your investment (ROI). There are some things that you’ll never get a return on, like if you spend a few thousand dollars on a vacation. You don’t expect long term financial gains from that expense. But if you invest in coaching or training, you certainly expect ROI – return on investment. Begin analyzing all your spending decisions to determine whether they result in present based expenses or future based investments.
If you have a couple of free hours, you can make the future based decision to read a helpful book, or you can watch a movie. Both choices are equally valid: neither makes you a good person or a bad person. But what are the results? I’m not saying you should never relax or never watch a movie. However, if you want to take your life to the next level, different decisions will have to be made about how you invest or spend your resources. To pursue the future you want, seek to make more investment-minded decisions.
In 2006, as Dawn and I were transitioning to our new training business, we were more successful than we’d ever been. But we still wanted a fresh set of eyes and another perspective, so we decided to find a coach. This was a $15,000 investment. but it was worth it. We left his office with a list of twenty-six action items. He told us that normally, it takes people two years to get through all these tasks. We finished them in two months. We had already made the decision that we wanted to change the future, so when we ran the credit card for fifteen grand, it was a future based decision that gave us a great return on our investment. It helped us develop a better brand and decide where we needed to improve, and it was a catalyst to help us take our company to the next level.
“You are who you are and what you are because of what has gone into your mind. You can change who you are and what you are by changing what goes into your mind.”
Changing your thoughts is changing your mindset. But how do you do that, and take your life and business to the next level?
1. Change your inputs
Read and listen to great minds. Choose books, podcasts, and videos that build you up and teach you what you need to know. Associate and learn from people who are future based thinkers.
2. Invest in yourself
Figure out what skills and knowledge you need, then do whatever it takes to attain them. Get a coach, go to trainings, invest the time.
3. Never finance luxury
I heard a well-known billionaire make this statement. Think about it. Sometimes you have to finance things, and it’s okay to finance necessity, personal growth, or business items. But don’t borrow money to buy luxury.
4. Think like a farmer
Farmers are great at investing. They plant the right seed in the right soil, then wait patiently for it to germinate and come up out of the ground. Then they tend the plants until harvest time. Be a long term thinker, like a farmer.
As you consider your business in light of investment vs expense, try the tips offered above. There’s a simple way to check your progress of transitioning from an instant gratification thinker to a future based investor: always assess potential ROI. Every time you spend money on something, ask what you can expect back. Focus on minimizing expenses while maximizing investments, and watch your future brighten!
Joe Pici has been voted by Global Gurus into the TOP 30 Sale Trainers in the world for 2018! Congratulations JOE!