Renée 🐝 Cormier

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Questions to Help You Mind Your Business… Question #2 is about money!

Questions to Help You Mind Your Business… Question #2 is about money!

This is the second in a series of thoughts and opinions by Graham Edwards and Renée Cormier — click here to read the backstory and inspiration (if only for the entertainment). It should be noted that neither of us have seen or discussed our answers before they were posted, which in our minds makes this all the more interesting.

In this blog series we will attempt to answer ten different questions business owners may need answered, using our individual and unique perspectives and approaches. It is our hope that this series will inspire both action and interaction. Please feel free to comment and ask more questions.


Question #2:  Where should I spend my money?

Renée:

In business, the question of where you should put your money is a rather important one. For the purpose of this post, I feel I must state that both the question and the answer assume that the business in question is turning a healthy profit. The act of putting money into a failing business isn’t usually seen as a wise move, so I prefer to leave that alone.

When deciding where to invest money in your business, you should ask yourself the following questions:

1. How will this increase productivity?

2. How will this increase efficiency?

3. How will this save me money?

4. How will this increase sales?

5. What will be the return on investment?

6. How long will it take to see a return on my investment?

If the product or service you wish to purchase provides you with a satisfactory answer to any one of these questions, then going ahead makes good sense. The truth is, most seasoned business owners have no difficulty figuring out where to spend their money. What they may be unaware of, however, are the many ways to fund their business that will not deplete their own cash reserves.

The fine art of using OPM (Other People’s Money)

I first read about the concept of using other people’s money to make money, several years ago through Richard Kiosaki, author of Rich Dad, Poor Dad. I later discovered that rich people never use their own money to fund anything, even when they can well afford to. Warren Buffet, Oprah Winfrey and Peter Drucker all use other people’s money. In fact, Peter Drucker’s very definition of business is “other people’s money”. That says a lot. Use other people’s money to create a business and sustain it. The following are some sources of other people’s money you may not have thought to access.

Government grants and loans: This is one of my favourites. The Canadian government provides a multitude of grants and guaranteed loans to support businesses. For example, if you want to purchase a small business, the government will give you a guaranteed loan of $375, 000 to make improvements, purchase equipment, etc. and up to $1 million if you are also purchasing the real estate. The beauty of this, is that if things go sideways, you are only on the hook for 25% of the debt. The government will give the remainder to the bank and you will owe nothing more. My brother did this 12 times while building a very lucrative fitness chain in British Columbia, so I know it works very well.

Business owners can also access $10, 000 per employee to pay for training programs, so there is no excuse not to invest in that! You can also hire more employees and access subsidies for wages for employees under the age of 30, minorities, immigrants, people with disabilities, marginalized citizens, summer students, etc.

If you would like to expand your product line by developing something new, grants are available for research and development, and innovation. Likewise, you can also get free money for adopting green initiatives, developing green technologies, purchasing hybrid vehicles, retrofitting lights and much more.

If you are interested in exporting your product to other countries, the Canadian government will also give you up to $90,000 to help you build business relationships abroad.

The Canadian government even provides equity investment to Canadian businesses. In fact, there are so many funding opportunities provided by our government, you should really check this Government of Canada website before you look anywhere else for money.

Angel Investors and Silent Partners: If you are planning to take your business into a whole new realm but need a little help from someone who would gladly provide funding with little interference, then you should consider accessing angel investors or a silent partner. There are not-for profit organizations that help entrepreneurs find investors and there are venture capitalists who also provide the service of matching business owners to investors. You could also check with business lawyers, accountants and investment bankers to see who they have in their network to help you out.

Crowd Funding: People use crowd funding sites for all sorts of things. We often think of crowdfunding as a way for ordinary people to get in early on a developing technology, but crowd funding can be a lot of different things to a lot of different people. The trick to successful crowd finding is in how you position your plea and how well you leverage your existing social network. Offering something to contributors is better than offering nothing, unless you are donating to a charity. You need to be very creative with crowd funding initiatives because the space has become quite crowded and the novelty of helping people out for nothing is wearing off. I get requests from LinkedIn contacts all the time to contribute to campaigns, but I rarely see any compelling reason as to why I should. Should the first interaction you have with someone through social media be about getting money from them? Not at all, and that is why you need to really strategize a complete approach to your crowd funding campaign. Asking won’t necessarily lead to getting.

Bank Loans: Sometimes working out a bank loan for something that will help your business is still a pretty good idea. Shop around for the best rates and see who really takes an interest in supporting your business. I’m going to put another plug in for the Canadian government here. BDC is a bank that is a crown corporation set up to support Canadian businesses. Since they do not have the revenue targets that the other banks have, there is less pressure to sell you something you don’t need and a greater inclination to actually help you find a better business solution. There was a time, when many business owners did not find BDC to be very helpful, but I have been hearing a lot of good things about them lately from different business owners who have used them. They are much easier to deal with than before, so don’t discount the value of paying them a visit.

In summary, I guess the answer to the question, “Where should I spend my money?” is really to not spend any of your money at all. Use other people’s money, instead!


Graham:

This is one of those questions where you already know the answer will be “it depends”.

It depends on the stage of the business, the business goals, strategies and plans, the current needs of the business, current business problems and opportunities, available cash, ability to attract investors, revenue growth expectations, OPEX considerations, et cetera, et cetera — so ultimately it depends on the current situation and the current state of the business, as well as the overall vision of the company.

Now let me attempt to steer this away from becoming a 500 word “non-answer”.

Although there are never any guarantees, consideration to spending on the following does increase your chances for success:

· Product Research and Development — Development of products to expand the business’s product offering, product diversity, or re-enforce your business’s value proposition. (Also applies to services)

· Sales and Marketing (Commercial activities)— Activities to promote the company, its value proposition, or increase revenue.

· The Customer Experience — How you make it easier and more satisfying for the customer to engage with your business and increase the likelihood for repeat business.

· Et Cetera — situational.

It should be pointed out there are a number of truisms that accompany any discussion that involves the spending of money:

Truism #1: Money is like a toddler in a china shop — he has lots of potential but if you don’t pay attention to what is happening the little guy will cause great havoc. *

Truism #2: Leaders and managers will be “judged” on their ability to manage the money they are responsible for.

Truism #3: Business leaders and investors tend not to like surprises— they particularly don’t like surprises when it comes to money.

The money you spend on any business activity should be part of a well thought out business plan and aligned with the goals you want to achieve; just as important, you need to have systems and processes in place to assure your OPEX is well managed and does not exceed your OPEX plan.

Because here’s the thing, if your OPEX is out of control, the discussion as to where to spend your money will probably be “moot”.

Iamgpe

* I know this to be true because I was once given an assignment in another life where it was quickly pointed out that the department was $1,000,000 over budget in the previous quarter (yes that is the correct number of zeros). When my finance partner and I dug into the situation, the only reason we could come up with as to why OPEX was out of control was simply because no one was paying attention to what was being spent.

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Comments
Renée 🐝 Cormier

Renée 🐝 Cormier

3 years ago #9

Thanks for sharing !

Renée 🐝 Cormier

Renée 🐝 Cormier

3 years ago #8

#7
Thank you, Harvey Lloyd. Your insight is greatly appreciated and highly valuable. I'd be interested to know why 10% is your magic number? Why not 20%? Just curious.

Harvey Lloyd

Harvey Lloyd

3 years ago #7

This is a great series of Q/A with some in-depth thoughts. Your first in the series of questions is tied to this second question without exception. Finding solutions to money issues without fully understanding your unique business profile increases risk. If i might add to the matrix of the investment in your own business. I have watched many friends and business associates invest in their vision without attention to ROI. This has almost always ended in a sustained business model where they never made money. When i say ROI i dont mean we should be myopically focused on returns, but rather consider that if we are going to invest 100k in anything we should also consider the return as part of the larger business picture. If i had a 100k and invested it into my own business, I expect to add X customers/revenues/profits. I would have this expectation if i placed the same funds in a retirement account. This exercise allows us to monintor our investment in a very tangible way. My number is 10%. If i am too spend money towards a goal it has to offer a 10% return within the evaluation. I dont always get the return but i do know what to monitor and where to tweak the plan with the information in hand. Great series.

Sara Jacobovici

Sara Jacobovici

3 years ago #6

A great resource and a must read by Ren\u00e9e \ud83d\udc1d Cormier.

Sara Jacobovici

Sara Jacobovici

3 years ago #5

Invaluable resource Ren\u00e9e \ud83d\udc1d Cormier. Looking forward to the next one.

Renée 🐝 Cormier

Renée 🐝 Cormier

3 years ago #4

Thanks again for the share, Javier \ud83d\udc1d beBee!

Renée 🐝 Cormier

Renée 🐝 Cormier

3 years ago #3

Thank you for sharing, John White, MBA

Renée 🐝 Cormier

Renée 🐝 Cormier

3 years ago #2

#1
Thanks, Kevin, and thank you for sharing!

Kevin Pashuk

Kevin Pashuk

3 years ago #1

Two bright minds (and beBee friends) discuss thoughts around investing in your business... Worth the read.