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Building Your Business By Investing In People Rather Than Stuff

Resourceful People

You’ve just started your business or had a brilliant idea for one you want to start. After some research and planning, you’ve figured out what you need to setup and launch your business and you’ve got a list of things you need to purchase.

Now throw that list away and read this.

There are two main areas where you can invest your start-up capital. The first is in the infrastructure or “stuff” you need to operate your business. The other is people.

One road is easy and largely ineffective. The other road is challenging and leads to powerful results.

Buying All The Stuff You Didn’t Know You Didn’t Need

There are a lot of caveats in investing too much into building your business’s infrastructure too soon. Most people start buying the stuff on their list and as they go along, end up whittling the list down because the cash starts running out quickly. Or, they buy cheaper stuff.

Didn’t really need a Porsche to start a couriering company did you?

The reason this happens is because stuff doesn’t sell anything. It doesn’t go out and knock on doors. It doesn’t even produce the goods you’re selling without people at the helm. Without people, stuff is an expense that brings in no revenue.

And if you buy stuff before you know enough about your business, the market, the competition and the emerging technology trends … you’ll probably buy the wrong stuff. Now you’ve got all this useless stuff!

And no capital.

How To Invest In People Instead Of Stuff

Sure, you need some stuff. But by investing your capital more heavily into people rather than stuff, you’re building a company with a foundation and a good measure of the best resource every new business can hope to have. Brain cells.

Consider these things:

  • Managing is hard. Buying stuff is the easy way out of what you really have to do which is build and lead a team of people that can make things happen.
  • Managing is really hard. Not only do you have to find the right people, you have to keep them. There are going to be people that you hire that you have to fire. There’ll be others that just don’t stick around very long. It takes time to build a great team and you need great people to grow a company and move forward.
  • ROI. The more stuff you buy, the more sales you have to get to pay for it. And the less time you have to do that before you run out of capital.
  • Scalability. When you first start your business, outsourcing the work as you need it to get done means you’re paying as you earn. You’re only paying to fullfill the needs of each sale as you get it. If you buy a whole bunch of stuff, you need a certain amount of sales to pay for all the monthly expenses on that stuff. It might be rent on a large building or a loan payment for equipment. Don’t assume you’re going to get sales you don’t have yet.
  • Expertise. Stuff is stupid. You’re going to run into problems that you never considered or dreamt of. The more brain cells you’ve got to work on the problem, the faster you’re going to find a great solution and move forward.
  • Flexibility. A box packing machine packs boxes. A warehouse management system counts boxes. A person can do both. Just a little slower. Until you know exactly what you need, and how big or how much, flexibility will allow you to juggle a lot of different things. You can automate with stuff once you have enough experience to know exactly what you need.

Follow The Business Chain

The right things in the right order make a successful business. Break the chain and you break the business. But if you do the right things in the right order, you’ve got a better than average chance of success. The chain goes like this:

Idea > People > Plan > Sales > Capital > Purchasing

You purchase stuff. It’s at the end of the chain. But luckily, you threw that list of stuff away.

Denouement
 

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11 Comments

  1. Indeed. Invest in the things (people) that will help your business grow! You can always buy the “stuff” later on, when you’ve become filthy rich! :p

    -Gregg

  2. Hey Gregg,

    It’s much better to buy the “stuff” later on. I was reviewing the business plan for an entrepreneur last year and one of his capital expenditures was for a company boat.

    He had a great plan overall, but he was a little ahead of himself on that one :)

  3. I’ve seen this happen on a lot of start-ups. I think it must be easy to justify stuff before the reality that you have to do the work hits.

  4. Anthony,

    Very true. Buying stuff is just too easy. It’s a diversion. I think it’s the old “build it and they will come” mentality. Works great in movies. Not so well in business.

  5. A company boat…oh man! That person was planning business fishing trips!! :D

    -Gregg

  6. Gregg,

    That’s exactly what the boat was about. We convinced him that it would be a better idea to lease one on occasion until the business was pulling in enough money to comfortably afford such an expense.

    Starting up is all about cash flow. A boat is a big money sink and not part of his core business. Plus by leasing one occasionally, his “entertainment” budget for clients is more flexible. He can tailor it to the client, like going golfing or whatever instead.

  7. [...] Building Your Business By Investing In People Rather Than Stuff: It’s no secret that most of the companies that failed and closed doors or are struggling financially invested in stuff instead of people. The employees are the life force of any company. Investing in people (the right people) rather than stuff is a no-brainer, but still a lot of companies don’t “get it“. [...]

  8. I couldn’t agree more – I think that every company I have worked at have failed to realise the value of people!

    - Martin Reed

  9. Martin,

    It really goes bad if, in the beginning, they blow all their capital on stuff rather than talent. Stuff is no good with out the right team of people to do something worthwhile with it

  10. Nice one, Shane,

    The allure of accumulating “things” for business success mirrors the same phenomenon in personal life. Very soon, we are stuck with inanimate objects when what we really need are personal relationships to fortify our lives.

    It’s harder to hire and get close to people than it is to press “submit” and buy some stuff for the business. Building people requires an emotional and mental commitment; having things just requires a dust cloth or a janitorial service.

    Keep writing…

  11. [...] success starts with having the right people. And outsourcing is about finding people who can do something better than you can, (and [...]


 

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