It is a great position to be in: you have made some profit in your business above and beyond what you need to survive. Congratulations! Now, would you like to go to Aruba or continue expanding your business? Hopefully you have made enough profit to do both, but in the event that your choice is to continue to expand – as it should be if this is the beginning of your business – here are some ideas on what to reinvest in.
To shore up your reinvestment willpower, remember that Alan Weiss of Summit Consulting Group and writer of the popular business blog ContrarianConsulting, says,
“My advice to solo practitioners and boutique firm owners in the professional services business is to never cease increasing your value and seeking out prospects, while solidifying current client relationships“in Come Out, Come Out, Wherever You Are
ON FEAR: Do not be afraid to grow and expand your business by reinvesting profits. While it seems like everyone would naturally reinvest profits for future expansion, it is often not done because the business owner is afraid to spend their hard-earned money on activities that may or may not result in financial gain. However, the uncertainty of gain is a part of business itself and profitable enterprises have very little future if these types of maneuvers aren’t undertaken.
The issue then becomes, which one(s) to choose?
Improving Business Processes via Service Professionals
A lot of solo consultancies use accountants and attorneys, employing these people at the outset. The accountant can get the books started in a proper way, which is preferable to transitioning later from an ad-hoc system to something more efficient. An attorney can look over contracts that you are signing from your clients as well as help you develop your own contracts. The attorney is also used to protect your intellectual content on the internet and to provide you with valuable insight into procedures for successful business as well as referrals to local professionals who can assist you in other matters.
At some point you may also decide that it is time to start hiring sub-consultants to help you with your projects. There are entry-level freelancers who can take over routine tasks, allowing you to focus on the business or advanced work. There are peer-level consultants who you can swap work with when there’s too much to do or too little to do. There are subject-matter experts who you can hire to formally review your work or do a particularly high-level task that you don’t have experience with.
I’ve used sub-consultants in all three categories with great success. It is true that to do so you must give up some of your total revenue. However, it is very much worth it. A few years ago I had some tough analytics to work out and I decided that I needed a statistician PhD to go over everything and make sure it was sound. The few hours of time was worth the peace of mind that I was, indeed, delivering a quality analysis, and I learned several techniques in the process as well.
In the course of my 10-year old business I’ve hired on a contract basis a web developer, graphic designer, two entry-level GIS technicians, and many peer and expert level GIS and cartography professionals.
It is essential to reach out and get help on projects when needed. The aim is to always provide a superior level of service.
Computer hardware, especially memory and graphics cards, need to be top of the line in many organizations, GIS firms included. You may be stingy on your laptop purchase but go high-end with the desktop if you only need the laptop/netbook/tablet for Web work while on the road. You may need high-end laptops for client work on-site.
A larger firm may want to invest in a centralized server with which to share data and projects as well as disk space for backups. While I put this is the “infrastructure” section, these items can be virtual, of course, in the sense that the server, backups, and other items can be purchased as cloud services.
Whatever you need, this is something you can’t be stingy on. A company without the tools it needs to do its job is a company with a downward outlook.
This is a tough one. Many are turning to free and open source solutions. I have, in the past, used open source as an alternative to buying expensive add-ons for particular project tasks. If I were to be doing those project tasks on a daily basis, however, I would have purchased the expensive add-on as it would have made sense for efficiency purposes.
Developers can purchase hosting for wiki, source control, and task management software such as trac on various sites (e.g., wush).
When it comes to GIS and graphic design software, there still isn’t much way around purchasing high-end software when you do high-end work. However, subscription programs are now being offered for some software such as Adobe Illustrator that are perfect for consultants who only need that software a few times a year rather than every day.
No one needs a recap on the rapid pace of business change these days. Continual education is your friend. Spending money on lectures, seminars, college courses, workshops, books, and trade journals are all things that should be considered in your profit reinvestment plan.
Karsten Vennemann over at Terra GIS, for example, teaches open source GIS classes in the Seattle area. Greg Babinski of the King County GIS Center teaches a URISA cartography class. These kinds of courses are generally a great return on investment because they are small and personal, with many opportunities to gain insights that you may not hear elsewhere.
When trying to narrow-down your educational focus, ask yourself what your core business is. My core business has always been geo-analytics (though as you know I am also a cartographer). To that end, purchases that I make in education are prioritized around my learning analytics. I have 6 books next to me, for example, that most people would consider enormously boring including Geostatistics for Environmental Scientists (Statistics in Practice) and Statistical Methods for Geography: A Student’s Guide but that are important references in my work.
Advertising is a mixed bag. A business associate recently told me about how she did an in-kind exchange of services for a banner ad in a trade magazine. The ad was garnering many hits but not translating into sales. After tweaking the ad’s landing page so that it contained a personal message for those clicking through from the magazine and including “about us” verbiage, more of the clicks were turned into sales. Most of us wouldn’t have figured out that nuance to advertising success, and it took consultation with a marketing expert for her to finally succeed.
Advertising expenses, therefore, may need to include the hiring of a marketing firm to help you wade through the nuanced business of getting business. Depending on your particular niche, you may or may not need this.
The best form of advertising is usually word-of-mouth. How can we achieve the level of trust that is inherent in word-of-mouth referrals? Simple. By becoming an active member of your professional community, your home community, and other places where you can have actual relationships with people rather than a one-way hawking of wares. Often this can be achieved with no financial investment at all, though financial support (such as sponsoring a conference rather than just attending, for example) is a great way to give back.
You can hire someone to sort all this out for you. Remember, fringe benefits can run 30-50% of a full-timer salary. A contractor can often be better because you are matching skills to tasks. Don’t over-hire. Tread carefully when hiring a “double-you” who doesn’t have anything different or extra to bring to the firm. If you hire a “double you” and then double your business you haven’t really gained anything.
PERSONAL STORY: I’ve been tempted so many times to hire an executive assistant. There’s an article on executive assistants in an old issue of Harvard Business Review that I went to town on, highlighting and underlining all the tasks they typically help out with. An executive assistant can take a lot of advanced work off your hands such as editing, billing, research, as well as things like travel arrangements, scheduling, and communications filtering. However, this comes at a high price and you must be confident that the benefits to your efficiency and thereby to your business income will outweigh it. I still haven’t hired an executive assistant but this may be to my detriment.
There are times when I feel like an in-person client visit is important. In these instances, I’ll usually book a flight, one night at a hotel, and a car rental. I’ve stayed at friend’s homes before, and that is wonderful too, excepting that you might be a bit less rested than needed for the client meeting! Call everyone you know in the vicinity to ask them if they can meet with you while you are there. By booking as many colleague and client meetings as you can comfortably fit, you maximize the return on the travel investment. Don’t wait for a client to request your on-site presence. Take the initiative to build a real relationship (live! In person!).
Travel for conferences and conference fees also fall into this category. I’m not what they call a “professional conference attendee” but it makes sense to pay visits to the conferences that best suit you. If you must save money, I’ve heard that some people buy special “exhibit hall only” tickets. This allows you to visit with friends and colleagues and meet new people without being a full-out attendee.
What ways do you reinvest in your business?