Are You An Investment Or An Expense? - RD185

When pitching, do you position yourself as an Investment or an Expense?

I've covered a similar topic to this in a past episode of the podcast. This time around, I don't want you to think like a designer. Instead, I want you to put on your entrepreneurial hat, and think like a business owner.

As a business owner, what is your number one goal? If you answered anything other than growing your business, you need to rethink your priorities. Any business owner who's first goal isn't to grow their business, might as well throw in the towel and find a job working for someone else.

Don't get me wrong; according to Entrepreneur.com, there are plenty of reasons to start a business.

• To provide a needed service
• To help people
• The Freedom it gives you
• The pride of ownership
• Allows you to follow your passion
• Gives you more flexibility
• Lower taxes

However, regardless of why someone starts a business, if their priority, once the business is running, isn't growth, then failure is almost a sure thing. Because in the business world, standing still is the same as going backward.

With that in mind, what is one fundamental way to grow any business? Let me give you a hint. To make money, you need to... SPEND MONEY.

For any business to succeed, the owner has to spend money on the company's behalf. And there are only two types of spending when it comes to business — spending as an investment or an expense.

What's the difference between spending as an investment or an expense? The difference is ROI, Return on Investment.

When spending money on a business the owner needs to determine whether or not there is an expectation of return from that spending. With an investment there is. The same cannot be said of an expense. Have you ever heard the term ROE - return on expense? I haven't. An article on the website Ratchet and Wrench states "you can recover an expense, but only by identifying it and reframing it as an investment"

So with an expense, a return is not expected. However, there is a return expected with an investment. The very definition of an investment is "to allocate money in the expectation of some benefit in the future."

So once again, thinking like a business owner, what do you think will help you grow your business faster? Spending money on an expense or spending money on an investment?

The obvious answer is as an investment. The tricky part is knowing how to identify which is which.

Investment vs. Expense.

How do you know when an expenditure is an investment or an expense? Is a building an expense or an investment? What about a vehicle? Office furniture? Decore? Association or Memberships fees? Training?

It can sometimes be challenging to identify because many spendings could fall into either category. A business owner needs to be able to identify, which is which and try to minimize expenses while spending on investments to grow their business.

Ok, you can take off that entrepreneurial hat and start thinking like a designer again. As a designer, whenever you pitch an idea to a client, be it a logo design, a new website, a car wrap, or a trade show booth. Are you consciously positioning yourself as a business expense or as a business investment?

Are your clients wondering how much your services will cost them, or do they imagine how much your services will earn them? Do you see the importance of that distinction?

As soon as you flip that switch, and get clients thinking about the ROI, the return on their investment with you, then the price you charge isn't an issue anymore. When done right, the client will think you are not charging nearly enough and sign your contract before you come to your senses.

How to position yourself as an investment.

The way to position yourself as an investment is by showing your client the value you bring them.

For a logo design project, you want to explain how the new logo will be memorable, increase client retention and familiarity with the brand and grow the customer base. More customers sound good to any business owner.

Plus, a new logo can rank at the top of the market and possibly even surpass the competition's brand imagery. How much is it worth to a business to be seen in higher standards than their competition? $1,000? $5,000, $10,000?

There's much more to successfully pitching a branding project, but you get the idea. Your part of the selling process is much easier when the client sees you as an investment.

For a web design project, never agree to a web project simply because "the client needs a website." It's a given that every business needs a website, but there's much more to it. Why do they need a website? If a client's only reason for a new site is because everyone else has one, then what you are offering is an expense for the client.

However, by positioning the website as a client acquisition tool that, once again grows its customer base, increases their sales rates, brings more awareness to their brand, etc., etc. Suddenly the cost of the website changes from an expense to an investment.

So many designers struggle with pricing. They are afraid to let the client know how much a project will cost, for fear of losing the job. Don't be like them.

Prepare your clients by showing them how hiring you is an investment and not an expense, and the cost often becomes a moot point. When taking the ROI of their investment into consideration, most clients will think you are not charging enough.

When done correctly, you will discover just how easy it is to land design projects.

How are you positioning yourself?

Let me know by leaving a comment for this episode.