Image by Tima Miroshnichenko: CC0 License

While it’s impossible to start or maintain a business without spending some money, your business budget is about the most important balancing act that you’ll face on this entire journey – spend too much and it’s curtains for all of your efforts until now. Spend too little, and there’s no chance of the expansion that you need to compete or survive. 

This can feel like an impossible balance to achieve, and it’s by no means easy. Luckily, it is possible to always check that an investment or expenditure is worth your company’s while, and asking the following questions is all it takes to protect yourself.

Is there a viable return on investment?

Return on investment (ROI) is the single most important determinant of whether or not a business expense is worthwhile because, in theory, a high-yielding ROI means that your money will quickly multiply. This is what you want from any business investment, and is especially possible from expenditure that directly impacts your business output, including investment in new equipment, high-end staff, or marketing expertise from companies like WebX360. To calculate this investment metric for any purchase, simply divide money spent by net investment gain, and then multiply by 100. This will provide you with an admittedly rough figure, but a much clearer idea of whether or not you can expect to see notable, and worthwhile returns from money spent here. 

How does investment impact your budget as it stands?

Even a promising ROI isn’t enough to justify an investment that empties your bank to the extent that there’s no business left to benefit. As such, it’s also essential that you consider what state any investment will leave your finances in right now. Obviously, this is going to be a more pressing concern for businesses operating on a tight budget, where savings may be necessary before large scale investments are possible. Even when you’ve got more money to play with, though, it’s crucial to make sure that investments are evenly spaced and leave ample funds in the account to implement disaster recovery plans, and generally weather the periods you can expect before returns are possible. 

How do you check or predict how an investment will impact your budget? You need to use an old accounting trick called creating a trial balance. Effectively, this is where you add up the comings and goings from an account during a specific period, seeing what your balance is at the end. In this scenario, you account for the investment spent over the period, along with any other income or outgoings. It should help you predict what you’re left with, showing how the investment will impact your financial situation and letting you make better decisions.

Does that investment offer longevity?

While you could technically run a business through short term investments and returns alone, it would be incredibly difficult to thrive from doing so. Hence, it’s also important to consider the overall longevity of any investment. This is the difference between, say, a professionally designed website that fuels nearly every conversion you enjoy from this point onwards, or something like investment into a rare merch design that boosts interest in the moment but stops there. Both options may offer value but, if you’re concerned about your finances, long-term investment is undeniably key, or should at least be tagged onto those shorter solutions (e.g. email sign ups before rare merch is released, etc.).

Image by CottonBro: CC0 License

In business as in life, investment can be a slippery subject. Make sure that you’re able to stand straight regardless by answering these questions before you even consider parting with your hard-earned cash.