An Investment Mindset: Key to Scalable, Agile Growth

Too many business owners are stuck in an expense-focused mindset instead of being investment-focused. An expense-focused mindset is a mindset of lack and survival. Certain expenses may be viewed as a cost of doing business or unavoidable and just what is necessary to operate. It is like not valuing your people’s time shared in my Forbes article “Why Everyone’s Time in Business Matters.”  Every dollar you spend in your business should reap some form of return on your investment. Every. Single. Dollar.  

1. A Growth Mindset: If you are saying things such as “we can’t afford this at this time” or “when we make more money or profits,” you are not in a growth mindset, but rather a survival mindset. Whenever you are thinking in terms of limitations, you believe this is your reality to survive. Even amidst insurmountable challenges an entrepreneur with a growth mindset will believe that they will find a way or make a way. There will be a mentality to explore possible resources and a conviction that there are multiple options that can be considered. A business owner with a growth mindset believes investing in the business and its people are worthy and necessary. 

Finding a way or making a way is empowered by helping others find a way or make away. This includes your workforce as well as your customers. Exploring all potential resources and multiple options gets you to consider how you can more effectively leverage your people’s skills and talents, their time, your time, and technology for greater efficiency and effectiveness. Viewing both your business and your people as worthwhile investments changes your thinking to one of forward thinking versus limited thinking. 

2. Four Resources:  The four resources that need to be assessed on an ongoing basis within your business are time, people, technology, and money. How are you effectively investing in time in your business? How are you investing in the right people within your business? How are you investing in technology in your business? If you clicked on the link to the Forbes article mentioned earlier, you know that time is spent by people in a business in five key income-impacting ways: Generating, Producing, Sustaining, Supporting and Enhancing. Having people spending their time in the most efficient, effective, and value-added ways inside and outside of the company is a game-changing growth dynamic. Technology integrated effectively can help save time and empower your people to be more effective in their jobs.  

When time, people, and technology are not considered to the extent of their resource value, money is typically not being allocated appropriately or strategically for momentum-building impact. In essence, you may be allocating money in the budget that is not necessary, will not reap return on investment, or could be allocated in better ways. To ensure sustainability, growth, and strategic differentiation, where you invest money should also focus on ways to better leverage time, people, and technology throughout your company. 

3. ROI Measurables: There are two measures that need to be considered when confirming an expenditure will be a good investment. The first are quantifiable investment factors and the second are enhancement investment factors. The quantifiable factors are more tangible to measure, whereas the enhancement factors are more intangible. Either way, key performance indicators should be defined for the ability to measure and monitor after the investment is made. 

To follow are some quantifiable ROI factors to consider:

• Increases productivity so more is being accomplished in less time or with less effort.
• Increases efficiency in a process so time and money can be spent elsewhere. 
• Increases profitability of an offering so more money is being realized with each sale. 
• Increases sales into business that are currently not being realized.
• Saves monies being spent in the business (fixed and variable costs). 
• Recoups monies being spent for allocation elsewhere or improved profit. 
• Reduces costs while enhancing deliverables. 
• Increases the likelihood of capital funding. 
• Increases valuation of the company.

 To follow are some enhancement ROI factors to consider: 

• Allows more time to focus on income-generating or income-producing activity. 
• Allows more time to focus on income supporting or sustaining activity. 
• Improves employee performance and communication.
• Adds capability or capacity within the business. 
• Adds skills and internal competency within business. 
• Adds credibility within the business. 
• Improves customer relationships within business. 
• Improves employee attitudes and morale. 
• Increases knowledge and expertise in business. 
• Aids in distinguishing against competitors. 

 In working with clients, we use a ROI Enhancements and Quantifiables Matrix to stimulate discussion and analysis to confirm whether an initiative being considered is a worthwhile investment. If you are interested in exploring further, the matrix with some examples is accessible in the P.S. of this blog. 

4. Budget vx. Spending Plan: A business should have a budget and a spending plan. Some people may think, “Isn’t that the same thing?” No, they are not the same thing. A budget is an estimate and guideline for categorized expenditures based on income and desired profitability over a specific period of time. A spending plan is based on current and projected income which adjusts based on targets being reached.

When working with a construction monitoring and soil testing engineering firm, the concept of having both a budget and a spending plan was driven home during our facilitated goal-setting session. The owner had been basing growth goals strictly on a 15-25% increase in sales each year. However, while realizing these targets, the company was always in a reactive mode to meet the demand that had been realized. This resulted in bad employee hiring decisions and scrambling for equipment or resources that required paying more due to the urgency. During this goal setting session, I pushed back and asked the following questions. What net profit do you want to realize? What equipment will be necessary in your testing lab with this growth? From a capacity standpoint, what staffing will need to be added in the lab and out in the field? Will administrative support need to be added to support the larger lab and project management team? Will the 15%, 20% or 25% growth require expansion in another geographic area? Will an office need to be added if this is the case? Is your technology able to scale from a CRM, project management and operational standpoint? 

All these questions resulted in a spending plan based on different percentages of growth. It also resulted in micro-goals to support the overriding sales goals. The spending plan empowered the firm to be proactive in hiring, equipment purchases, technology investments, and more. Their profit increased and the business owner’s anxiety due to growth decreased. 

5. Capacity & Value Building: To be able to effectively scale a company for year-over-year growth, as demonstrated in the example of the engineering firm, investments need to be made proactively, staying one step ahead of demand. Being reactive to demand is being a business that is merely surviving versus thriving. Being reactive results in stumbling through growth versus empowering growth. However, an investment mindset isn’t just about capacity building. It is also about building a company of true value and market worth. How are you investing in leadership succession? How are you investing in growing tangible and intangible assets in your business? How are you minimizing risk? How are you ensuring differentiation, reoccurring income, or improving your EBITDA? The area most ignored by business owners and leadership is around organizational value building. This is a prime example of leading by working in the business versus leading by working on the business. When leadership is not focusing on how to make the organization more valuable and scalable, it is no wonder that businesses get stuck in either feast or famine or flatlined growth.

The investments that you make are critical to the ultimate success and growth of your business. Considering what you are spending in your business for it to grow is as important as what you are making in revenue and profits in the business. When you understand the dynamics of all three in combination, your business can grow and prosper regardless of economic conditions.

Yours in economic vitality,