The Art of Investing Wisely in Your Business
In this post, I’m going to share some advice I’ve accumulated from years of on-the-job, real-life experience (yup, I’m a generous guy when it comes to sharing tips and advice on my passion—building!) As many of you already know from watching NS Builders podcast, I love fielding homeowners’ and building professionals' questions. Today I want to talk about two popular questions I get a lot from those in the trade. And they both have to do with the art of investing wisely.
Let’s jump right in…
WHY INVEST MONEY BACK INTO A PROJECT?
So, obviously, when I say “investing” I’m not talking about investing in the stock market or a hedge fund (me sharing tips on market investing would be as helpful as a Kardashian doling out advice on how to can vegetables). No, I’m referring to an investment you make back into your business, your project, your customer, and really yourself.
First, let’s break down the question into two parts: How do you decide which projects to invest money and time back into, and do the benefits outweigh any financial loss?
Although you can take something valuable away from every project—a new skill, becoming more proficient at using a particular tool, or simply adding to your level of expertise with the additional hours of experience—there are some projects that I wouldn’t view as “investment-worthy.”
Here’s an example: When I was first starting out as a builder, it was one guy and me. At first, it was small jobs—which we needed and cut our teeth on—but we knew these were not the jobs we envisioned doing in the future. When we worked on a small renovation, we knew that to keep the business growing, we would need to focus on securing full home renovations or new home builds. So, those initial small jobs were not ones I deemed worthy of pouring some of the profit back into—the return just wasn’t there.
With the business direction more clearly defined (high-end, upscale full renovations and new home construction), it was time to implement investment strategies. This would include carefully putting some of the profit back into a particular project. It’s all about the return.
As I tested this out on specific jobs, I could see the payoff was worth it. For example, a couple of years ago, we did a double-curved staircase with a sweeping black handrail. That staircase was tricky; it was the first time we had built something like that. It took a lot of man-hours, which translates into more expenses. But the education we received in return was priceless. The client got a killer staircase, even more than they expected. So, was it worth it for us to take a little bit of our profit and invest it back into this particular project? Absolutely! The work experience, the amazing testimonial from the client, the pictures and video we were able to use for our marketing campaign, and the opportunity to elevate our brand to the next level—again, I can only describe it as priceless!
Figuring out which projects are worthy of investing in is really a team effort. Communicate with your team; ask for their input as to what could be done to make the project a huge success in terms of quality and customer satisfaction. Leaving the relative safety of a plateau can be daunting, but the results from reaching higher are worth it. And if you devise a plan from a creativity standpoint and are willing to adopt innovation, it will become clear which projects will net you more in return for your investment of time, design, and effort.
Next question…
HOW DO I AVOID GOING INTO DEBT WHEN FIRST STARTING OUT?
I get asked a lot about how much I initially invested in my business. I like to compare the growth of my company to that of a baby. When the business was in its infancy stage, not only did I not have a lot of money to go out and buy every tool I would need or a fleet of trucks with the company logo emblazoned on the sides, I also knew I didn’t want to go into debt. It was a personal decision; maybe your circumstances will be different, and upon the advice of a financial advisor or business coach, it may be advantageous for you to take out a loan and secure some working capital.
But, back to me… I wanted to avoid debt like it was Ebola. So, I didn’t take out any loans. I started my company pretty organically; I bought what I needed when I needed it—my truck, a trailer, tools. I started to accumulate stuff slowly. As a small remodeling contractor, I had just what I needed.
Then I grew into a toddler… started crawling and walking about and securing bigger jobs, which necessitated more tools, a shop, and of course, the most valuable assets of all—employees. As the team grew, our needs increased—bigger millwork shop, multiple work vehicles, more expensive equipment, and talented players—that was when I had to consider taking out my first business loan.
Eventually, I grew into a teenager and the adult I now claim to be; learning along the way how to take on debt responsibility, always having a backup plan, and never giving up my determination to avoid all unnecessary debt. I can honestly say I sleep better at night, knowing that I’m not in over my head with the business. And I will never go broke trying to look rich.
Reassessing our company goals and success is never-ending. The team and I work together to project growth and expenses and then figure out where we need to be in terms of working capital. And having a trusted financial advisor to bounce our ideas off from is a lifesaver.
Final Thoughts…
So, whether it’s putting some of your profit back into your business or knowing when to obtain a loan for capital, there is an art to making wise investment decisions. Learn to do so now, and it will benefit you for years to come.
Invest in yourself—your lifestyle, your comfort, your security—by investing in your home. Whether a renovation or new build, let the experience of NS Builders guide you through the entire process. Call us today; we can’t wait to hear about your dream project. Let’s start this journey together!
-Nick Schiffer