TGP Tutorials & Articles

Re-investing into your TGP and Plan B

by DamageX of AskDamageX.com, November 19, 2007

Before you even consider whether you should re-invest some of your profits back into your business, you need to ask yourself whether you're doing this to grow, or just to get by. Yes, it's true, quite a few people are satisfied to make a decent living from their online ventures, not least due to the fact that it gives them a lot of freedom to work from home, take the breaks they want whenever they want, not have a boss yelling at them when they fuck up and so on. Sometimes they could actually make more by taking a day job, but due to the aforementioned freedom they enjoy, they choose to stick around.

So, you need to decide whether you want to grow or just make a decent living. If you just want the latter, then you shouldn't worry too much about re-investing your profits, for several reasons. One is that your profits will likely not be too big (not that this should be a problem), so you'll need most of your earnings to cover your running expenses. However, you should still start considering a contingency plan, in case whatever it is that makes you money now won't last forever. And trust me, it will not last forever. Which is why you should be wise enough to start a savings account and put aside 5-10% of your monthly income. You need to do this every month, because for all you know this entire industry is going tits up tomorrow and you're up shit creek without a paddle. Don't believe me? Ask around, we have plenty of webmasters around here who used to do six figures a year and nowadays barely get by. Also, you need to set aside some time to do some prospecting and some serious thinking as to what you could do if you were no longer able to make money doing whatever it is that you're currently doing.

If you want to grow, your task is slightly more challenging than just having a Plan B. First of all, you need to save as well, to make sure you don't end up in the poorhouse, should this industry dry up. You also need to re-invest in your business. How much? Well, that's entirely up to you, but part of how much you're able to invest has to do with how wisely you spend your money on everyday living. Provided that you want to make it big, you need to keep improving your competitive advantages, one by one or several at a time, depending on how big an investment buffer you have. In order to do this you need to not spend money on other stuff than on things that will improve your business.

Yes, it's a trade-off, just like everything else. You need to pay a price TODAY for the success you want to enjoy TOMORROW. There is no way around it. So, making decent coin and want a new car? How about not and instead of buying a new $100K Mercedes invest that money into automating your business even more? Or hire staff? Or managers to handle your staff? Or better scripts, more content, more sites, more traffic? And no, you don't need $100K, it was just an example, you can start with $500 or even less. You just need to identify where, in your current operation, the disposable money you have for investing would do the most good and put it in there. Sometimes you may even need to save up for a month or two or three, before you can make a useful investment. Stop treating things as costs, unless they don't add any value whatsoever to your operation. If you think of things you need for your business as costs you will be more reluctant to shell out the cash for it. Think of them as investments instead and run some numbers on how long it would take you to recoup that investment, how much money it would generate/free up for other investments and after how long and how you plan on investing that money. Keep thinking in terms of benefits and value, instead of in terms of cost. Think of it as input which will eventually end up generating a bigger output, through value added.

One of the worst mistakes I have seen people make, repeatedly, is take that $100K, which often is their FIRST $100K, and buy a new car for it. Or even worse, take their first $50K and buy a $100K car, by financing the other $50K, thus also incurring an interest cost. A brand spanking new pussy magnet or penis enhancer or whatever you want to call it. Then, 5-6-12 months down the line business goes bad and they have to sell off the pussy magnet, for half the price they paid for it. Think that's money well-spent? What if they, instead of buying a car, which not only costs in terms of insurance, gas, parking and whatnot but also loses value every day, thus costing even more, would have invested that money into say buying servers and doing co-location instead of renting their servers from their host? Buy servers at one-time price and then host for half the monthly cost. Investment recouped in 4-8 months and after that all profit. Think that would've been smarter?

Anyway, you get the point, don't spend money on luxury until you actually have more money than you know what to do with. Not saying you should never treat yourself to anything. By all means, do treat yourself, you work hard so you need rewards too, in order to keep yourself going. But you need to be totally aware of the fact that, in most cases, the more you enjoy today, the less you will enjoy tomorrow and vice-versa. Be smart and save some money for a rainy day and be smart and re-invest whatever profits you don't depend on today. Make your business better, faster, smarter. That will make you richer, not the car you buy today and have to sell tomorrow for half-price.

This article appears courtesy and is the sole property of DamageX
Original thread at AskDamageX.com