When is a cost an investment?

Most businesses trade with the intention of making a profit. In order to do this they must pay certain costs. Generally, these fall into two categories: those that have to paid in order to trade, for example rent, rates, heating and so on, and those costs that have a more expansive role in maximising the profit you make, for example the advice you take from professional advisors that aid business development.

The first group you could describe as true costs the second as an investment.

Why investment?

If you buy advice that makes a positive impact on the ability of your business to make or increase profitability you can measure the impact of the advice and compare the cost, what you pay, with the benefit. In effect what you pay out creates additional income or profit – by investing in the service you have created additional cash flow – your investment has paid off.

It’s worth bearing this in mind when you are next faced with a decision to pay for advice: what are the likely benefits? Can they be quantified and what are the likely chances the strategies advised will work? Don’t forget that not all investments pay-off, especially in the short-term.

Costs that have to be paid can and should be targeted as areas where you could find cost savings by replacing with cheaper alternatives. Costs that may directly influence your business profits or sustainability should not be viewed in the same way. Measure the cost with the likely benefits.

Seeking out the cheapest advice may not be in the best interests of your business.


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