Some decisions or opportunities require an understanding of how it will add more time or money to the business.
Not all decisions or opportunities should be measured purely through a financial profitability lens. If a business owner only made choices based on what would add more profit to the bottom line, they would continue growing the business in exchange for their sleep and peace of mind.
There are two primary things to consider when investing to improve the business:
- Does the business already have cash flow to support the move?
- Will the opportunity improve the profitability enough to justify investing on the front end?
Forecasted cash levels in the monthly balance sheet (in LivePlan) can give us a preview of what cash might look like in the coming months.
If the opportunity requires a sunk investment, it's important to consider when the breakeven point will occur:
- What variable cost is being improved?
- How much is saved per unit?
- What is the cost of the sunk investment?
- How many units will it take to break even on the sunk investment?
- How long will it take to reach breakeven?
If it just doesn't seem like the right time to move forward with one the decision, consider ways to improve profitability ( or ) that will generate the resources required:
If there don't seem to be available improvements to the business, it may be worth looking outward for resources: