Where Should the Money Go First?

by Terri Lonier

As small business owners, we’re often faced with the double-edged dilemma of too much to do and limited funds. What’s the best way to decide where to spend those precious dollars? Here are three guidelines I developed along the way to building my own firm:

1. Make purchases that are revenue-generating investments.
Before springing for a new piece of technology or other equipment, determine if it will bring more dollars into your business or simply be a nice perk. Avoid the latter; invest in the former.

For example, way back in 1991 when I was considering buying an early laptop, I cringed at the price. Then I looked at my upcoming travel schedule and realized that the work I could do at 30,000 feet could pay for the computer – and more. I bought the machine, paid it off in 90 days with the extra consulting projects I was able to do on the road, and put it to work generating even more revenue for my business. Even after more than a decade, this principle still applies. Think revenue-generating.

2. If your clients don’t see it, don’t spend money on it.
Forget the fancy new office furniture or spacious office digs if your clients won’t be visiting you. You can get by with used filing cabinets and planks (a la Amazon.com, which spent many of its first years with desks made with $40 worth of plywood and 2x4s).

Instead, put your money into things that will establish your credibility with clients, and bring you new and repeat customers. That may be a better Web site, more powerful digital marketing tools, or other online improvements. Or, it may be in a more “analog” vein: a professional-looking business card, a nice blazer or a classic briefcase. Put your money where it will work hardest for you. (And no, this isn’t an excuse for a new wardrobe shopping spree!)

3. Pay your suppliers first.
When you’re faced with multiple bills to pay and strapped for funds, choose your payments carefully. I’ve learned over the years to pay my key suppliers and virtual team members first – because they’re often small businesses, too, and are counting on my payments. Most of all, when the next deadline crunch comes, I know they’ll be there for me, because we’ve developed a trusted relationship.

If you can’t pay a bill, don’t ignore it. Instead, call up the company and explain your cash flow situation. (Trust me, they’ve heard it before.) Offer to set up a payment schedule and agree to pay something toward the bill as a sign of good faith. There’s nothing that can darken your credit reputation quicker than missing – and then ignoring – bills that are due. It may not be pleasant to make the call, but it’s better than the negative fallout you’ll undoubtedly have to live with later if you did nothing.

Throughout your business growth, you’ll be faced with prioritizing where you put your dollars. Whether you’re facing big investments or minor expenses, take time to choose carefully so your money can be supporting your efforts in the best way possible.