Why Burgeoning Expenses Aren't Always a Bad Thing

Hold too tight on the purse strings and you could stifle your company's growth.
Partner, Mueller Creative, LLC
July 09, 2012

Your business is booming—but so are your expenses. Growth doesn't come cheap.

Early in my freelancing career, it was no big deal for me to type on a half-broken laptop prone to intermittent crashes. I could even live with the satellite Internet coverage I had in my semi-rural location. Why? I was just starting out. I was producing about one article a week, which meant that if the Internet was spotty and the computer froze up on the first day of the week, no problem.

I still had four more days to go.

You can already see the end of this story, right?

Supply and Demand

Increased demand, in my case, means about five articles a week or two posts a day or a video script and copy for a client's website.

Now of course this is good, and increased demand is what we want no matter what business we're in. Increased demand is growth. Increased demand is sales. Increased demand is profit.

We all celebrate. But then we have to go out and buy stuff to keep up with the demand. According to management expert Peter Drucker, "Growth has to be fed. In financial terms this means that growth in a new venture demands adding financial resources rather than taking them out."

In my case, feeding growth meant buying a new laptop and, well, a different house with actual high-speed Internet.

Here's where you can expect to add as your business grows.

Tech stuff. It's a technological wonderland we live in. But the wonders can't always keep up. As your business grows, you can expect to see a need for things like:

  • Server space

  • Software and software licensing

  • Tech support (you might have to hire that full-time IT guy instead of relying on your cousin)

  • Updated hardware and all accompanying equipment (computers, headsets, tablets, phones and cables)

  • Cloud-based services (some are free, and most are cheap, but upping to a premium level is still going to increase the cost)

Online real estate. As your business grows, keeping up a well-planned online presence is key. If your website is virtual real estate, you need to improve its curb appeal. No more blogspot for you, baby. Your online presence should include:

  • A fancy, new website

  • Professional search engine optimization and analytics help (a good inbound marketing firm can do this for you)

  • A company blog (you can parse this out to current employees, but if they're overwhelmed, you should look into outsourcing)

  • Social media maintenance (again, current employees can do this, but you need to pay them for it and it can easily be a full-time job)

Optional but often very helpful others include:

  • Graphic design services

  • Branding consultation/services

  • Public relations/publicity services

Inventory. All you purveyors of digital goods, skip this section; you're covered with that "server space" item, above. The rest of you will need to sink some money into increased inventory costs, which could include:

  • Manufacturing facilities

  • Storage/warehouse space

  • Shipping and logistics

  • Someone or several someones to manage inventory, from manufacturing (if you do that) to distributor relationships

Growth Isn't Optional

Of course this list is incomplete; the key word here is more. If you're manufacturing a widget and demand blows through the roof, you're going to need more manufacturing capacity to keep up.

Increased demand means you have to give increased supply, and for most businesses, that means increased costs. But that's okay, because remember this: You're making more money.

Planning for the Costs of Growth

What you don't want to do is spend all the money you make on ever-increasing costs. And that can happen. How should you handle it?

Set priorities. Decide which expenses must come first. Then decide how much of your increased income you're willing to spend, each quarter, to finance your growth.

Spend according to priority, not according to urgency. As your business keeps growing, you'll be able to meet those expenses one by one. Don't push to the financial limits. Keep your business operating in a healthy financial state, so that if growth slows or stops, it's not a crisis.

You have to grow. Best to be prepared for the costs that will come with it so you can continue to grow and see your business flourish.

Annie Mueller writes about all aspects of productivity in life and at work. Her work can be seen at numerous online publications. She blogs at AnnieMueller.com. Find her on twitter: @anniemueller.

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