Before You Spend Another Dollar on Your Business, Ask These Five Questions

Know Your Numbers | A SheAchieves Series

There is always something else you could buy for your business: a better website, new branding, advertising, software, equipment, inventory, a market booth or professional help.

Some of those things may be exactly what your business needs. Others may simply feel like progress.

For a solopreneur or very small business, that distinction matters. Every dollar has another possible use, so before you spend it, make sure it has a job.

SheAchieves Takeaway: Before you spend, know what you expect that money to do.

1. What problem am I actually trying to solve?

“I need a new website” is not a problem.

“My website gets visitors, but almost no one contacts me” is.

Before buying a solution, spend 30 minutes checking whether you understand the problem. Search Google the way a customer would and look at three to five similar businesses. What are they offering? What are they charging? What do customers praise or complain about in reviews?

Then ask a few real customers how they found you, why they chose you and what almost kept them from buying.

You can also use the U.S. Census Bureau’s free Census Business Builder to look at businesses, customers and demographics in your market.

You do not need a formal market research report. You need enough information to make sure you are solving the right problem.

2. What exactly do I expect this purchase to accomplish?

Write down the result before you spend.

If you are considering a $600 market booth, what are you expecting from it? $1,000 in sales? Twenty new customers? Fifty email sign-ups? A chance to test a new product?

Use this sentence:

I am spending $_____ because I expect it to help me __________.

If you cannot fill in the second blank with something specific, wait.

3. What has to happen for it to pay for itself?

A little math can protect a lot of money.

Suppose you are thinking about spending $500 on advertising. Your average sale is $75, but after the direct cost of providing the product or service, you keep about $30.

You need roughly 17 additional sales to recover the $500.

Now ask: can this advertising realistically generate 17 new sales?

If you do not know, reduce the risk. Test $100 first. Try one market before committing to a season. Buy one month of software instead of a year. Order less inventory before placing a large order.

Testing before scaling is often much cheaper than learning after a big commitment.

4. Can I afford it if it takes longer than expected to work?

Do not look only at today’s bank balance.

List the business expenses you know are coming over the next 30 to 60 days: inventory, taxes, insurance, subscriptions, market fees, loan payments and other recurring costs.

Then ask:

If this purchase produces nothing for two months, am I still comfortable making it?

The U.S. Small Business Administration recommends tracking income, expenses and cash flow so business owners understand whether enough cash will be available when bills are due. Its Manage Your Finances guide is a useful starting point if you want help thinking through cash flow and basic financial management.

For a solopreneur, this can be simple, start:

Start with: Beginning bank balance

Add: Expected cash coming in

Subtract: Known expenses going out

To Calculate: Expected cash remaining

A basic spreadsheet is enough to start.

5. How will I know whether it worked?

Decide this before you spend.

• If you pay for a market booth, track sales, profit and new customer contacts.

• If you run an online ad, use a promo code, specific offer or landing page so you can identify the customers who came from it.

• If you redesign your website, record how many inquiries you receive now and compare that number afterward.

• If you buy software to save time, estimate how long the task takes today and check again in 30 days.

You do not need a complicated reporting system. You need enough information to decide whether the purchase did what you expected it to do. That gives you a much better basis for the next decision. Maybe you spend more. Maybe you change the approach. Maybe you stop.

The important part is that the next dollar is informed by what you learned from the last one.

Need Help?

If you are working through a financial or business decision and want another set of eyes on it, SheAchieves is here to help.

We are a 100% volunteer-led nonprofit supporting Arizona women entrepreneurs at no charge. Email us at info@sheachieves.org or fill out the contact form on our website.

If you would like to help us continue offering this support, donations are always appreciated.

Know Your Numbers is a SheAchieves series created to make financial and business decisions more understandable, practical and useful for Arizona women entrepreneurs.