3 Early Investments Every Entrepreneur Should Make
Grow Your Business, Not Your Inbox
Elon Musk is the kind of visionary who's worth keeping tabs on. So when in July he made an under-the-radar purchase of X.com -- a domain name he originally owned even before that company merged with PayPal -- savvy entrepreneurs took note.
Did he buy the domain to promote SpaceX? Does he have plans for some new, unannounced venture? Was it a purely nostalgic grab? We don’t know yet, but we do know that he saw value in the domain and pulled the trigger.
Unfortunately, many other entrepreneurs aren't so adept at seeing domain names and other business assets as investment opportunities rather than maintenance costs. For rising companies, the right investment at the right time could not only pay major dividends as the business grows, but it could also mean the difference between business success and failure.
Understanding investment opportunities.
Every decision a company makes is an investment — be it about new team members or new products — and leaders can further distinguish these investments into two categories: asset and business.
Assets such as real estate are some of the oldest forms of investment. Property ownership, for example, can help a young company diversify profits as it grows. Business investments, on the other hand, must align with the company’s vision, culture and goals, because these often require additional time and money to extract their potential value.
As a business owner for most of my life, I've seen companies mishandle or overlook myriad business investments, but the most common is the domain name space. Startups and small businesses often take the shortsighted approach of registering the best name available. By taking more time initially to understand the company's brand and then determining the level of investment that it would take to buy a recognizable and memorable name, businesses can actually set themselves up for quicker and more efficient growth.
Examples abound of companies purchasing the names they want after they're established: Twitter, which began with Twittr.com, eventually bought Twitter.com, and Facebook replaced TheFacebook.com with Facebook.com. Most businesses, though, don't grow big enough to spend hundreds of thousands of dollars on a domain name the way others have. Using a little forethought and some business acumen, companies can better tie their domain names and other investments to their long-term strategic goals.
Smart investments for small businesses.
The best investments provide both assets that will immediately increase company value and opportunities for long-term growth while not sacrificing other necessary resources such as day-to-day operational costs. Here are three strategies to achieve that:
1. Focus on people investments.
When I started my company, my most critical job was to hire well. I looked for experienced and trusted team members who shared my vision for the business and our products and who also shared my vision of success. I didn’t need to fill out the whole staff right away -- I needed only a few key people I could trust to own and grow their respective areas of the business.
Most importantly, when choosing a team, don’t treat them as a one-time purchase. According to a study by the Aberdeen Group, companies that institute formal employee engagement programs see a 26 percent increase in year-over-year revenue. Continue to invest in people's development by keeping them involved in high-level decisions and showing them the impact their work has on the growth of the company.
Anheuser-Busch InBev's approach to talent management is a great example of how to tackle such an investment: By assigning its new employees challenging tasks right out of the gate, it can better assess who will and won't be able to contribute to the company's future, allowing the company to moderate employee advancement accordingly.
2. Spend time readying the team for success.
Teams need to be set up to succeed in their projects, and it's a leader's job to invest the time necessary to accomplish that. In fact, a study by Deloitte University Press indicates that while 90 percent of leaders understand the need for employee engagement in the workplace, fewer than 50 percent actually have strategies for implementing it.
Depending on what my company is launching, I tailor the training activities around that specific product or technology and foster its implementation by coaching my teams. At a minimum, I clearly define my vision, the problem that's being solved with that launch and the strategy my company intends to follow to execute it. This sharing is critical to getting my teams energized and on board, because the more time I spend collaborating with them and planning for the future, the better the results have been.
3. Prioritize technology as tools for productivity.
During my years as an entrepreneur, I've found that no matter my level of funding, using technology to run lean has always been a worthwhile investment. According to the 2016 Brother Business survey, many businesses are already taking this step: Twenty-one percent of respondents say they plan to invest in programs like the cloud, and 28 percent intend to build their mobile workforce.
Some of my favorite technologies include ToutApp, a sales CRM; Slack, an internal communication and document sharing tool; and Dropbox Paper, a tool that allows us to work on shared documents. All of these are inexpensive investments that should be made early to maximize a team's productivity.
As a company grows, other tools such as Salesforce, Pardot and more advanced systems may take the place of those earlier ones, but investing initial dollars wisely in technology can ignite a business's scope and scale.
Leaders are always forced to balance what their business needs with what they have the capital to acquire, and spending a company's last dollars on non-cash investments is never a good idea. Smaller businesses in particular need to keep an eye on their burn rate and always have at least three months' worth of cash in reserve while still putting their money to work. The more a company can diversify its funds and invest in its future, the greater its chances of success.