Mind Your Business – Do You Want A Positive ROI Or Just An Expensive Hobby?

One of the things that really bothers me about the way most people run their online business is that they run it like a hobby.

Let’s say you’re an avid mountain biker like me… You’ve probably purchased more than one bike, buy new gear all the time, and if you travel to cool places to ride, you probably purchased a cool rack system for your vehicle to transport your bike(s) to riding destinations.

So how does this tie into business? Here’s how…

I’m betting you don’t maintain a spreadsheet or use Quicken or Quickbooks to track all your hobby purchases. So if I were to ask you exactly where you are this month with your hobby expenses…. gas costs, equipment purchases, bike maintenance, tires, tubes… etc… You would have no idea. Right?

Not having any idea of your “numbers” is fine when it comes to a hobby (although you should still be tracking expenses since some hobby expenses can provide tax deductions) …but if you run your business like that… You’re going to find it pretty tough to ever reach the level of success you want.

“To see how to get to your desired destination, you MUST know where you are right now.”

In my experience, the overwhelming majority of people in the online business, network marketing, home business industry are running their businesses like some sort of hobby. They use terms like “try it out”, “see if it works” or “I’m just dabbling”. If you treat it like a hobby you will always get hobby results.

Let’s talk about what it means to treat your business like a business…

First of all, you’ve got to take it seriously and recognize that it IS a business. Don’t discredit what you’re doing just because it’s a home business… many large companies started in a home or garage including Apple, Hewlett Packard, Google and Disney. After all, you started your business because you want to make a sizable income… Doesn’t it just make sense to treat it right from the start as the business it will become?

The SPEND vs. INVEST Mindset Shift

When you first get started, part of that process should be to start keeping track of everything you invest in your business. Notice I said “INVEST” and not spend? If you run your business like a hobby, you are just spending money… but if you’re running a business, you’re investing.

“People that look at their business expenses as money they are “spending” usually don’t last long in business.”

Those that think they are spending money in their business, typically expect immediate income as a result of that spending… and of course, that’s not how it works in business.

It’s really a simple business principal… You must invest in training, education, tools, etc… to get set up in business. Then you keep track of all those business expenses as your startup investment… and the really cool thing that happens when you do this… you get to write off the expenses against your income on your taxes. Do things right, and it’s like having the Government cover part, or all of your startup costs. Did you know that, even today the tax laws are written in favor of business owners?

You see, most people think the path is to start by “spending” the least amount they can to get their foot in the door of a business. They may plan to upgrade or invest in additional tools, training, materials, etc.. but only after they’ve started making money. People with this mindset are always the first to throw in the towel and give up on their dreams. That’s just not a solid plan for building any business. Hopefully you’re starting to understand why at this point.

I was just talking to someone the other day that started his online business 6 months ago and invested $5,500 in training and tools to get started. He then invested another $2,000 into paid advertising to get traffic, generate leads and start getting sales and new team members.

He shared with me that his online business was not working because after 6 months, he had only made $3,200 after “spending” $7,500.

Here’s what I showed him that completely changed how he looked at those results in his business…

He invested $5,500 in his business startup. This was training courses and an online tools to teach him effective strategies, and a couple of automation tools to help facilitate his business.

…This initial investment became his “BASIS” in his business.

Just like a “brick and mortar” traditional business will have startup costs (retail space lease, licensing, equipment, training, finance costs, etc.)… they are a necessary part of starting your business, but they do not produce income!

The income comes from taking the right actions once you are in business. Paid advertising can be one of those actions that can generate income.. or it could be social marketing, content creation and syndication, video marketing, etc. In this case, he had invested $2,000 on paid advertising that had generated $3,200 in income – a Positive ROI (Return On Investment).

Investment / Income * 100 = ROI %

$2,000 / $3,200 * 100 = 62.5% ROI

His $5,500 initial business basis will eventually be offset by profit as long as he continues with his business.

Even if he had been at a small deficit with his marketing dollars at this point, he is in good shape as long as he tracks, monitors and continues to improve. Part of running your business is taking ownership of your results… if you’re not tracking them, how can you improve anything?

Imagine if everyone that invested $1,200,000 in a Subway Sandwiches franchise quit after 6 months when they hadn’t made all their investment back yet. There would not be a single Subway store anywhere!

Most traditional business owners understand these concepts, but for some reason when it comes to a home business or online business… people tend to ignore this and treat it like a hobby, or even a lottery…. then they quit before they were even in the game long enough to expect results.

When I started my current online business in October 2012, I invested in the system and training, focused on my education and took action… consistently.

In my first 4 months I only made $1,400… this was quite a bit less than my startup basis.

…Did I quit because I was not profitable?

No!… that would have been a HUGE mistake!

I was invested and committed, I kept going, kept tracking my numbers and kept improving.

In month 6, I made $6,800 with zero paid advertising… and in month 8, while testing some cheap paid ads, that went up to over $10,000.

When you are keeping track of all your business expenditures, you can see exactly where you are in your business at any time… and that allows you to make informed business decisions.

In my experience… the biggest difference between those that are successful and those that are not, is in the way they look at their business (the way they think). You can have 2 different people marketing the same business or product, doing the same things… but one will fail simply because they didn’t understand the simple concepts I’ve just laid out in this post.

“If you’re a network marketer, stop viewing yourself as “in a business” (that’s a hobby mindset). Instead… see yourself as the “business owner” you are.”

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To Your Success!