Start spending to both make and save money

Whenever a team member has to make an almost trivial decision, such as choosing between two subscriptions of $19/month and $29/month, I have noticed that people’s work spending habits tend to default to the same mindset they use for personal income decisions.

It’s a human habit to want to be mindful of spending – just look at how outraged we can become when Spotify raises its monthly price by two dollars!

I understand; it’s a matter of principle. You want to be cautious with your spending because you’re unsure how those extra dollars might come in handy.

However, in business, there are many situations where those few extra dollars, whether expressed as absolute values or relative ones, simply do. not. matter at all.

The most valuable action is to understand the actual value of your time, your company’s time, and your team members’ time.

Let’s consider the subscription example. Suppose I have a salesperson who believes this tool would benefit their prospecting on LinkedIn.

I pay them $90,000 per year, along with a $1,000 bonus for each closed contract.

This translates to approximately $40 per hour.

If they spend even 15 minutes deliberating between which subscription to choose, that is the opportunity cost of them doing actual work that already cost you the $10 difference between the two subscriptions.

If they estimate that the tool could give them a modest 1% edge in closing just one sale, the difference would have covered itself.

This doesn’t even account for the other hidden costs such as physical and mental energy, emotional costs, involving others in the decision, seeking permission, bothering the operations team, avoiding the image of being a spendthrift, fear of mistakes, and so much more.

To make money, you have to spend money. If it's cheap, just go for it.

For larger purchases, it makes sense to be more thoughtful and involve others.

But what defines a large purchase for your company?

This is the question you must answer now.

You can determine a significant purchase by considering it within the following context:

Purchase risk = potential impact in context of our current spend

For instance, if you have a million-dollar company pursuing multi-million dollar contracts and striving for fast growth, your spending risk should align with your ambitions.

Most teams are given budgets that require approval and periodic review.

Provide more team members with a (virtual) credit card. Encourage them instead of making them feel guilty about spending it.

Decision-making speed is absolutely crucial as it builds momentum.

So, contemplate giving your teammates a discretionary, modest sub-budget for experiments.

Sometimes, you only need to strike gold once.