You want to invest in something, but how do you know when it’s worth it? Is it worth laying out a sum up front, or is it always better to save up first? In this article I reflect on some purchases I’ve made which have been worth it (and some that haven’t), and discuss how you tell if they’re going to be in advance.
How do you tell whether an investment is worth it?
Investments for a small business can be broken down into
- Outsourcing (paying other people to take on tasks you might do in-house)
- Products, materials and services
Is it worth outsourcing this task?
In a previous post, I talked about how to tell when it’s time to outsource a task to do with your business. My rules then were:
- If you’re rubbish at doing something and I’m good at it, outsource it to me (even if you’ve got the time to do it yourself or it’s going to cost you more per hour)
- If the time it will take you costs more in your worth per hour than it would cost to pay someone else to do it, then outsource it (e.g. transcribing your interview will take you 6 hours and you’re worth £40 an hour (£240) – better to send it to me who can do it for you for £60.
This links into a couple that are about time:
- If it’s going to take you 6 hours to do but me 3 hours to do, then outsource it to me
- If it’s going to take you 6 hours to do and me 6 hours to do, but you don’t have those 6 hours free, then outsource it to me
But you can add in some other factors, too, such as the boredom factor:
- If you’re perfectly able to do the task and it would cost more to have someone else do it, but it bores you to tears and you never get round to doing it until it turns into an unholy mess, outsource it to me.
This last one is how I decided to hire an accountant to do my accounts and my bank reconciliation.
Is it worth buying this product or service or these materials?
That’s all about outsourcing. What about investing in products and services? These are my rules:
- If it will make my work more quick or more efficient – consider buying it
- If it will make my records more secure – consider buying it
- If it will advertise my services to my core market – consider buying it (for a year on a trial)
- If it costs under £100 – go for it
Points two and four combined to make me buy my external back-up drive and my professional version of my transcription management software.
Points three and four combined to make me sign up for membership to Proz (a jobs board service), which I’ve stayed with, and other sites and associations, which I have trialled and haven’t stayed with (see section on Return on Investment in the next article).
Of course the £100 level is an arbitrary level I selected. In fact, I didn’t select it consciously: I’ve just noticed that that’s the level I’m comfortable with.
Regarding materials, I don’t use materials in my editing business. But the golden rule here has to be:
- Will the price of the item you’re making be higher than the cost of the materials? If not: find cheaper materials or adjust your prices within sensible limits
Is it worth buying this training course?
And a special consideration on training, as this is something I have been pondering and decided not to invest in:
- Is the training run by an accredited provider that is respected in my industry?
- Does it train me on something I will use in my everyday work life?
- Will it add a skill to my portfolio that I
- know there is a market for
- will enjoy doing
- have got time to commit to fully once I’m trained up?
Point two helped me decide not to take the training provided by a well-known and respected association in order to gain qualifications with them, because they are all about editing on paper and I have done one job on paper in four years.
And the last bullet in point three is how I decided NOT to pursue training in the art of indexing. Yes, there’s a market for it; yes, I would enjoy doing it; but no, I have a full roster of valued clients at the moment. If I was to take on indexing work, something would have to give: either my evenings and weekends, which I have pretty well reclaimed from Libro, or one or more of my current customers. I wasn’t ready for either of those scenarios, so let it go.
Do I invest in advance or arrears?
This is a tricky one. I’m facing it at the moment with my book.
I really want to publish a print version of my e-book. I’ve got some quotes for producing the back and spine cover art and wording, and for producing it as print-on-demand and fulfilling it via the online bookshops. I would be able to buy copies for myself and sell them at events. I’d also have a physical book with my name on.
I was always adamant that the book needed to pay its way, i.e. I wouldn’t do new or paid-for initiatives until the book had actually brought in the money into my bank account to pay for it. Ignoring the hours I put into writing and promoting the book so far, I would need to sell approximately five times as many e-copies as I have already to pay for the setup, design and print-on-demand service (the fulfilment cost comes out of the profit on each copy).
I should make at least twice the profit on each print copy that I sell as I do on the e-books, if they sell.
Do I wait until I’ve made that money to go ahead? Do I wait until I’ve made half of it and then risk the other half, assuming it will take me half as many books sold in print to get the investment back? Do I do it now and hope I sell 2.5 times the books in print that I’ve sold in electronic form to pay myself back?
Before, I’ve always waited until I have the money put aside before I buy something – I didn’t invest in my new PC and laptop until my Libro business had been going for a couple of years and I had the money in the bank (were they worth it? Read next week’s article to find out!). But I’m eager to get those print copies out there … and I really don’t know what to do at the moment.
How do you choose how to invest / whether to invest?
How do you make your decisions? Have I missed something here? I’d love to know your thoughts – do post a comment! And … should I make a leap of faith and invest in print copies of my book? Help me to decide!
In the second part of this article, I talk about how to calculate your return on investment, and I’ll be going on to share what’s been worth it for me (and some other people) – and what hasn’t.
Interested in finding out how I made the transition from part-time to full-time self-employment and built my business safely and carefully? Take a look at my new book, out now!