Episode 42: When Investing Is No Longer Investin‪g‬

Episode 42: When Investing Is No Longer Investin‪g‬

Susanne Mariga:Welcome to the Profit Talk Show. In this show, we’re going to explore strategies to help you maximize profits in your business while scaling and creating the lifestyle that you want as an entrepreneur. I am your host, Susanne Mariga. I am a Certified Public Accountant, a Certified Profit First Professional, and a Certified Tax Coach. Today, we’re going to talk about strategies to help you maximize profits in your business. 
Hello, Profit First Entrepreneurs. My name is Susanne Mariga. I am the Chief Accountant and Chief Profit Advisor here at Mariga CPA. We have an exciting episode to talk about today, and that is Investing and not just investing but When Investing is No Longer Investing? But before I begin, we’ve got some housekeeping items. We have a Profit First Masterclass that is starting this Monday, March 1st, and every day in our Profit First Master Class Facebook group. On Monday at noon, I am going to teach you the ends and outs of Profit First so that you can apply it in your business and you can have the best year ever. You want to check it out. Each lesson will be about an hour long and it will go for about a week. 
We’re going to talk about different topics related to Profit First, every single day of the week, starting March 1st. So, please invite your friends, invite your fellow business owners to our Facebook group. And again, that is Profit First Master Class with Susanne Mariga. Today, I want to talk about a really important topic in the world of entrepreneurship, and that is the topic of investing. And we, entrepreneurs, every dollar that we spend, that’s an investment, we’re expecting a return on investment or ROI based upon every single dollar that we spend. Today, we’re going to talk about when investing is no longer working for you? When can you continue putting dollars into a certain project, idea, or task that you have and it’s just no longer working for you? When to cut that initiative before it bleeds you dry? But before I begin, have you read the book Profit First? 
I love that book. It’s one of my favorite books in the entire world. And, I have to confess, I have read it three times. Yes! Three times. I have a hard copy. I have a kindle copy. I even have an audible copy. And, if you don’t have a copy now, order it right now on Amazon and search for Profit First by Mike Michalowicz. It is one of the best business books ever in the entire world. I love it so much. I’m writing a sequel to it which is a Profit First for Minority Business Enterprises because I believe in this book so much, and I want it to have even more impact. One of the things I have always found interesting about this book is that Mike calls businesses “cash-eating monsters.”  And in fact, he feels so strongly that a business can be a cash-eating monster that he made the subtitle “Transform Your Businesses from a Cash-Eating Monster to a Money-Making Machine.”
And so, I like to take this moment just to dissect what that means because that’s just so interesting. If you guys are not familiar with Mike Michalowicz, he’s a multi-millionaire entrepreneur.  He has several businesses, they have been seven-figure businesses and he’s stepping back to call these businesses cash-eating monsters. And the reason why he’s calling businesses cash-eating monsters is that that’s exactly what businesses can be. There’s always a need for a bigger office based, there’s always a need for a new computer, training new employees, and there’s always a need for more cash for the business.  It takes a very special person to go out on their own into the world of entrepreneurship. It takes a very special person to leave that comfort of their tribe, to leave that corporate job that gives benefits, health insurance, and literally to go out there and attempt to build your empire on your own. And most people would say, “You have to be a little bit crazy to step out in the world of entrepreneurship.
Even statistics tell us that we’re a little bit off to venture out into the world of entrepreneurship. This week I was reading this article from the site called Small Business Trends. My friend told me about it so I was reading it and on this site, it lists some statistics about businesses and I thought it was very interesting. It said on the site, for the businesses that are started today, 73% of them were started by males. In terms of age, 35% of them are aged between 50 and 59. So, these are people that have reached the prime of their career, and they’re like, “You know what, I can take this, this is what I know and I can make more money.” 
Now, 25% of them are aged between 40 and 49 and 18% are between the ages of 60 and 69. What we’re seeing is 78% of new entrepreneurs are above the age of 40. So, that means they’re no spring chicken, they know what they’re doing and are now literally taking it out into the world to teach others what they do or provide services to someone else. And, only 22% are actually under the age of 40, and those are millennials. So, most of the entrepreneurs are above the age of 40. I read on the site that the biggest reason that people start businesses is 26% said, “They want their own boss.”
23% said, “They love what they do,” and  19% said, “the opportunity just fell on their lap to start a business.”  Then, 12% said, “They just want to start a business because they are sick and tired of corporate America.” 71% of people that start businesses are Caucasians and white, 11%  started by Asians, 7%  are Africans, Americans and 6% are Latinos. But what I find more interesting is why businesses fail?
When I’m reading this article, what they’re saying is that when a business started in 2014, 80% made it through its second year. By the 3rd year, 70% are there, and by the 4th year only 62% are there, and by the 5th year, only half of the businesses were left standing. So, most of the businesses are not making it. And when they asked these entrepreneurs why they didn’t make it, they got different reasons. Today, let’s talk about the Top 10. The first reason was, there was no market need, meaning they started these businesses because they loved what they do, but they didn’t do the market research.
They didn’t put a lot of forethought into starting these businesses because they just did what they loved. 29% just ran out of cash. 23% gave up because they couldn’t find the right team. They couldn’t recruit, train, and they couldn’t build the right team, so they just ended up creating a job. 19% said they just got out-competed. Somebody else came in and beat them and they couldn’t survive. Then, 18% said, they couldn’t get their accounting right so they couldn’t get their pricing or costing right. 17% said they just have unfriendly products, and 10% said that they have products, but they didn’t have a business model
14% said they didn’t have a marketing funnel, they didn’t know how to sell and 14% said they just ignored their customer. 13% said they had the right product, but when they brought that product to market it was just the wrong century. So, those are the top 10 reasons why businesses fail. 
Today, I want to talk about the number 2 reason why businesses fail, and that’s because businesses just ran out of cash, and 29% of the businesses just ran out of cash. So, the question becomes, how does the business just run out of cash? Do you guys know I love the book “Good to Great” by Jim Collins? 
Who has read that book? If you read that book, give me a thumbs up, I love to know. In this book, Jim Collins talks about the Walgreens model. You guys know Walgreens, it’s a drugstore on every single corner. Every sale is a profitable sale. What Walgreens says is, “Get what you need.” It doesn’t matter how big the sale is or how little, either you come out buying a cane or a pack of gum, it’s gonna be a profitable sale for Walgreens.
Walgreens understand that you guys can go to Walmart. You can wait in that long line, and you will pay less for that pack of gum. And, so, what Walgreens is saying is like, “yeah, you can go to a Walmart, but if time is important to you, get that pack of gum in 5 minutes.” You can get that convenience but you’re going to get it at a higher cost, and which is going to give Walgreens a higher profit margin.
Now, as an accountant, I worked with several multi-seven figure clients. And, as a result of this, I get to see insights that most people never see in their business and I get to see what works and what ends up just a plain waste of time. Today, I’m going to tell you a little dirty secret that nobody will ever share. To scale your business, especially if you want to scale it to a seven-figure mark or beyond – It does take money to make money. That’s exactly true if you’re wanting to scale a business. Every company that I have looked at, every company that I have seen or worked with, if they have hit that seven-figure mark, at some point, they have had to make an investment. When they’re making this investment, there’s a risk. That means they’re going to have to take some risks because when you invest in your business, there’s no guarantee that there’s going to be a financial reward or gain, or if things are going to work the way you intended them to be. There’s also an unknown factor. 
You can buy whatever you want, you can invest in it, but there’s no guarantee that you’re going to get it. So, there are certain things that you need to decide and monitor.  When I’m looking at my company, investment takes different forms. I’ve seen companies invest in equipment because they wanted to be able to manufacture faster, they wanted to reduce headcount by implementing certain technologies, machines, and equipment. I’ve also seen companies invest in their employees to scale because the more hands that you have in a certain service-based industry, the more time inventory that you have, the more that you’re able to process and take on additional work. I’ve also seen entrepreneurs invest in advertising to attract more ideal customers or even increase their sales.  
However, each of these investments has a cost, but there’s no guarantee that any of these investments are going to work.  But, every single seven-figure business I have worked with, has at some point, been forced to make a serious investment in their business to take it to the next level. Unless you inherited your business from mom and pop because sometimes that happens, and someone else, in that case, made an investment for you. They’re going to have to invest to scale beyond where they are and scale into that seven-figure mark and beyond. And so, the question becomes, when does an investment cease to be an investment? When does an investment now become just a black hole where you will not get the ROI? When do you stop waiting? When do you start to call the shots? When do you decide that this investment no longer works for you?
When do you hit the realization that the number one reason for business failure is that there’s no market need? When do you decide that there’s no point in continuing with that? Because at some point, you’re going to make a decision and the quicker you make the decision, it is going to prevent you from running into business failure number 2, which is running out of cash. You don’t want to run out of cash. So, the quicker and more accurate you make this decision, the better off you’re going to be. Let’s talk about that. Let’s talk about, when is the time to call the shots? When is the time for you to decide that what you’re doing is no longer working for you? And, when is investing just expensing, and there’s no possibility for a return on investment or ROI? And, this is a scary topic because as entrepreneurs, we’re always on the verge of this major success.
There’s something big around the corner that’s going to happen, some big major events that are going to happen. So, when do we decide that enough is enough? When do we decide that when we continue to invest in this way, it’s just to bring us to business failure number 2, which is running out of cash? 
For me, before I take on this investment or project, it’s assigning time limits with key milestone dates before I even begin this venture. And, what I’m doing is, I’m setting up my counter, and I’m like, “Okay we’re starting this investment, we’ve done our research, and these are our key milestone dates, so we’re going to evaluate the progress of our project.” This might look like, if the event hasn’t occurred, meaning that we’re investing in this, we’re expecting so much ROI, we’re expecting movement in a certain direction, what this means is that, at the first milestone, we’re going to take a look at it and see if we’re getting close or are we moving in the right direction that we expected to move into? The second milestone date is going to be a little more intense. It’s going to be, if we’re not moving in the direction that we’ve expected to move into, then what needs to change for us to move in that direction?
And that may mean I need to re-evaluate my process and the people that I currently have in that process. What needs to happen to shift so that we can start to create the movement for the investment to produce that ROI?  And, then my third milestone and key date, if my target is still not being met after I’ve already changed what I could change and I’ve already re-evaluated my process and the people that are in there, is to decide that it’s time to stop. It’s time to decide that it’s no longer time to proceed. This is a very hard decision because when we get into a new venture as an entrepreneur, we pour not only our money, but we pour our heart and passion into it.
As entrepreneurs, that’s what we’re doing. We’re investing in our businesses and no one out there starts a business to fail. We started a business because we loved what we do, and we loved it so much that we would do it for free. We need those boundaries and key milestones that force us to evaluate our progress and make critical decisions and evaluate those great ideas, so if it’s not moving in the right direction, it doesn’t leave us dry. 
So, Entrepreneurs, don’t be the number-two reason why businesses fail, don’t allow yourself to run out of cash. Constantly evaluate this investment and set those key milestone dates, so that you can look back and see if it’s something that you want to pursue. Constantly re-evaluate. Where are you pouring your financial resources? Again, set those key milestone dates, and critically evaluate your data and the return on your investment. Another thing that I will ask you to do is, ask yourself. If you’re talking to your best friend, and your best friend was in this predicament that you’re in, what would you tell him? Would you tell him to keep pouring his heart and soul into this investment? Or, would you rather say, “Hey, man, you need to run for the hills and stop spending money where it doesn’t produce any results.”
And, then, my Profit First Entrepreneurs have the self-control to force yourself to walk away when it just no longer works for you. It was wonderful spending a day with you. 

Now, our Profit First Masterclass kicks off this Monday, March 1st at noon, Eastern Standard Time. I am going to teach you the ins and outs of Profit First, so definitely sign up for that. Now, I look forward to seeing everyone on Monday, make sure you invite your friends, your coworkers, and in the meantime, may the profits be with you.
I want you to have your most profitable year ever. Yes! No matter what’s going on in the economy, no matter what’s going on in the world, you can have your best year ever. I want to show you how. Join me in our private Facebook group where I will be hosting our Free, Yes, I said FREE Profit First Masterclass on Facebook. Please join the Profit First Master Class with Susanne Mariga. Again, I look forward to seeing you there and watching you have your best year.

DISCLAIMER: The information contained within these podcasts is provided for informational purposes only and does not constitute, an accountant-client relationship. While we use reasonable efforts to furnish accurate and up-to-date information, we assume no liability or responsibility for any errors, omissions, or regulatory updates in the content of this video. Any U.S. federal tax advice contained within is not intended to be used for the purpose of avoiding penalties under U.S. federal tax law.

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