Expenses are Part of Doing Business Online
Running an online business is just as much of a real and legitimate business as owning a brick and mortar store. Whether you are blogging to make money, running an e-commerce website, providing a membership or subscription-based site, or doing affiliate marketing, you are running a business. Part of running and managing a business is incurring necessary expenses.
For those of us who do business online it’s easy to forget about this, and we often ignore products and services that could improve our business in some way because they’re not free. The amount of freebies that are available online has really caused a lot of bloggers and online entrepreneurs to blow off outstanding opportunities to make their business more profitable because of an expectation for free alternatives.
We’re obviously better off to spend some money (and spend it wisely) where it will drastically improve productivity. But it seems that this is forgotten a lot of times. In many cases there are free options online that we could choose, but spending a little bit of money may make a big difference for our business. For example, I wrote a post on my blog a month or two ago about online data backup services, mostly because I was looking into some options myself and the post helped me to do the research and find the best option. If you’re running an online business, chances are you have a lot of valuable information on your hard drive, and if that hard drive crashes you’ll lose it all. As a result, there are tons of online services for automatically backing up a hard drive. Some of these services are free and some are not. The service that I wound up choosing was Mozy, which costs only $5 per month, which is a ridiculously low amount to improve the security of your business. Still, with other free (and inferior) options available, many people will overlook a great service because it is not free.
When Should You Justify an Expense?
When you are producing revenue
If your online business is making money, you should be willing to re-invest some of that back into the business. In order to improve your business and increase the amount that you make you may need to spend money on certain things. How much you re-invest is up to you, but be willing to consider an expense that is justified.
When it saves you time
Depending on what type of business you are running there are probably plenty of products and services that can save you time in one way or another. Having more time available to dedicate to the business is a huge plus. An example of this is a WordPress plugin that Adnan uses here at Blogtrepreneur, OIO Publisher. As a premium plugin OIO publisher costs $37, but it handles and manages all facets of your blog’s advertising. By spending $37 on the plugin you can automate some of the manual work that you do and free up more of your time to work on other aspects of your blog.
When it helps you to improve the quality of your work
Some products and services will justify their cost by allowing you to produce better work. Take for example a graphic designer. There are plenty of free online image editing tools available, but any serious graphic designer has invested in Photoshop. By spending money on the best product available, the designer is now able to do a higher quality of work than would be possible with just free tools. This is a pretty basic example, but these types of scenarios apply to any type of online business you can run. Another example would be a keyword tool for someone who does a lot of pay-per-click marketing.
When it makes your business more secure
This is where Mozy’s service justified itself to me. I’ll gladly pay $5 a month to know that if my hard drive crashes I won’t have to scramble to find or replace my work. It’s something that I hope I don’t have to use, but my business is more secure because of it.
When it improves your image
An online business, like any other, has a need to present a favorable image to customers and visitors. Traditional business spend a lot of money on developing their image, and this can also be a factor for online business through such services as web design and logo design. A professional image is necessary in order for others to see you as a legitimate business.
Keys to Remember:
Respect your time
Your time is valuable. If you can free up more time to manage and promote your business, be willing to considering adding some expenses to do so. You’ll find that the extra time will usually allow you to make even more money in the end.
Expenses are a necessary part of doing business
In most cases, online business require less expense and risk than most traditional business, and this is obviously one of the biggest reasons online businesses appeal to so many people. However, even an online business will incur some expenses. Don’t expect to run a profitable business, online of offline, without having some expenses.
Business expenses are tax deductible
The great thing about business expenses is that they can reduce the amount of tax that you pay (Note: be sure to seek the advice of a tax professional in your country for guidance). Your money will go further than you think it will.
What’s Your Opinion?
How do you feel about expenses for online businesses? Are you willing to pay for something that will help you in specific ways? What are your most significant expenses?
Thanks for the reminder, Steven! I often fall in the trap of thinking that saving money is all that matters.
While it’s good to not spend too much on the business, I guess sometimes the best way to save money actually is to spend some first
Jarkko,
I think it’s always good to be careful with your money, but I see a lot of people who want to run a legitimate business but they’re unwilling to pay $10 for something that will really help them.
Awesome post Steven - thanks for that.
It’s a good reminder to me especially, as I always hold off on spending money online. However, as everyone says “It takes money, to make money”, and especially in a game like PPC > Affiliate Marketing…you just need some capital that you’re willing to invest and risk in order to get back bigger rewards. I suppose that’s where your idea of spending money only when you have in-flowing capital comes in.
Lol @ Jarkko - thinking along the same lines!
Sorry for the lack of comments Steven, there have been a few hosting problems in the past few days, my RSS subs went way down and things generally went out of whack. Hoping comments will get busier…
You have done a great job
Would you believe that it was just the other day I was looking at Mozy as an alternative backup solution.
For years now I’ve been using an external USB hard disk drive and a backup software from Acronis. While this works a treat and I’ve no complaints, it does bother me that I’m storing my backups on-site, and should I have a disaster I could loose everything.
A online backup service like Mozy seems to be the way to go, as it will remotely store your important data of-site.
Maybe you might do an expanded post on your experience with Mozy sometime?
Hey Adnan,
No worries. I noticed the site was down on Sunday. I thought maybe you were upgrading WP at the time.
Yes, I agree expenses are a necessary evil or if you can read into this “the Ends are Justified by the means” which says to make money most times you will have to spend some.
Keeping track and setting a target date to show results are important. If you find after a reasonable target date you are not getting the desired results you must go back to the drawing board until you do. Sometimes it takes a lot of tries until you hit the right target.
They say the best things in life are free… but when it comes to business you need money to make money!
Hi:
There are alternatives out there that you might want to take a look at. See http://www.storageguardian.com. Thier offering have a bear metal restore capability that is worth looking into.
Roger,
I know there are a million different options for that type of service. My point wasn’t that Mozy is the best or the only one, I was simply saying that it is a type of service that I think is worth paying for. If you are referring your own service you could at least mention that you’re affiliated to the service rather than saying “their”. There’s nothing wrong with promoting your own service when it’s relevant, but it looks deceptive to not be upfront about your affiliation.
Great Post, I think today that so many people have jumped on the band wagon of offering free products or services, that people have come to expect everything should be free. I believe you have to weigh out what your need is, do the research as to what is available and what you get for the price, because sometimes you can get a free product , but it will not do the total job you need done, yet for a low price you can get a similar product that will do a great job for you.
Pugsley
not just online business but to almost all businesss as well. be it restaurant or hotel or distribution. among others.
I can’t think of a web entrepreneur I know who hasn’t at some point had this problem. The same goes for hiring help, which has more than quadrupled my income since I started.
Eric,
Yes, I definitely agree. But for some reason it seems that online businesses tend to not want to spend money whereas offline businesses understand that it’s necessary.
Steven,
Good article - most entrepreneurs should remember the old adage - takes money to make money - You should look at expenses as “investments” into your business’s growth, productivity, profitability. I regularly invest in advertising PPC, targeted magazines, PR , software etc - if you have a vision where your business is going then the short term outlays won’t distract you or discourage you from investing in the businesses future.
David Fairley
Its so true. Expenses are not compulsory, but wise investments are. The thing is to know the difference.
It is hard to justify expenses for an online business if you aren’t making much money. I try not to spend money on anything except traffic. It is easy to justify an expense when there is a quantifiable return on your investment. For example, if I spend $5 and make $12 selling a product then it wouldn’t be all that hard to justify spending much more. For most content management products, there is an open source alternative.
Can you justify spending more than $100 for a vbulletin license when phpbb and bbpress can be had for free? I can’t.