Investment or Cost?

Running a business or a not-for-profit organization isn’t cheap.

It requires a significant amount of time, outside resources (e.g., professional help), and yes, money. If you’re goal is to sustain an idea beyond the initial stage of passion and adrenaline, you’re going to need some capital for your endeavor. Unfortunately, many entrepreneurs find themselves paralyzed between the world of what could be and the world at hand because of their fiscal limitations.

I feel your pain.

In this current economy, it feels intuitive to cut “costs” and hold on to dear life until the economic tsunami passes through. Putting things on pause can be perceived as prudent. Unfortunately, this posture will kill many companies and organizations. The reality is that the world will continue to move forward right by your pause and evolve in the midst economic crisis. Will you be around if things never get back to where they were?

Although excess spending is always good to cut off, I think there’s a difference between a “cost” and an “investment”. A cost is a reference to the total money, time and resources associated with a particular purchase or activity. On the other hand, an investment is a reference to the use of money for future profitability. Investments usually has more risk involved, but also could lead to more profitability (or reward) in the long run.

It’s important for entrepreneurs to distinguish what elements of their endeavor should be considered costs versus investments, even outside of sheer cash. In my experience, how one views a particular element will change drastically how one values and perceives its potential.

For example, if I view my website as a cost, then I will most likely see it as a single transaction with a creative designer and/or developer. I would probably seek the most frugal option to “get something up” while making it look somewhat presentable. My mindset would be to minimize fiscal spending (i.e., save costs) while settling for hopefully a decent product.

Contrarily, if I view my website as an investment, I’m not only thinking of the end  product of a functional website but what it will do to future profitability for my company or organization. I would probably be more prone to evaluate processes more holistically (even if it takes more time on the front end), consider alternatives, and allow identified objectives to guide the website build. In addition, I would probably be more open to exploring related elements like branding, identity, consistent voice, logo development, etc. because I know that the end goal is not just a nice website, but a fuller strategy that fulfills the company or organization’s mission.

My recommendation to you is that you cut costs and invest well. Investment will usually cost more on the front end, but ultimately, it’s the investments that will allow your company or organization to breathe, grow, and propel change.