June 20, 2011, 5:00 am

How Increasing Our Cost Is Helping Our Company Grow

by: Silent Partner    Category: Make Money Online
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Since this blog’s direction has changed a bit and became more about our online business, we have been publishing details regarding both our revenues and the costs of our business (which we will be getting even more specific about) and one of the comments that is recurring both on these posts as well as in private conversations that we have is the fact that our business is risky because of the very high costs. It’s an interesting point of view and I think it’s certainly easy to see these expenses that way. However, in our opinion, it does not portray the reality of the situation. Mike explained why our model is safer than the stock market. Today, I decided to take a deeper look not into our specific expenses but rather to discuss why our costs are so high and why we hope to take them higher in the coming months and years.

Looking For Growth

Very early on after the creation of our company, we both agreed on a long term vision not only in terms revenues and profits but also in terms of lifestyle. I think it’s fair to say that we have very big ambitions for our project and while many of you consider our current numbers incredible, it’s still far from what we are aiming for. With that in mind, there are not a million different ways to increase our business growth. We could have kept one blog, and it would have been a great way to increase our business year over year. Chances are good however that it would not be enough. Both Mike and I have similar circumstances:

Desire for the business to generate much higher revenues within 5 to 10 years
-A very good current job that pays well and that we enjoy doing
Limited time available (we both have a family and a balanced life with friends, sports, etc)
We can live with little to no income from our online company

As you can see, we are limited in the amount of time that we can dedicate to the business. Thus, the only way to generate higher growth was to get help. Does increasing our costs scare us? Not at all. Every year, at our annual shareholder meeting, we review all expenses, all outsourcing and employees in order to make sure that they still make sense.

Where Our Costs Go Towards

I think it’s critical to understand that the vast majority of our costs are not necessary for us to maintain our business. They are however critical for us to maintain the strong growth that we’ve had for a few years now. There is a major difference between the two. If Mike or I decided to go full time, we could more or less cut expenses by 80% and keep everything running smoothly. That is not our goal however. The best way for us to increase future profits of the company is to maximize our revenues and profits. So what do we invest in?

Design: While our niche sites generally have more general designs, we have made sure to have all of our “main sites” run on original designs that help not only improve the user experience but build a stronger brand. Most of our costs are for new projects although we do have a few on our existing ones such as the last redesign of this blog.

New Projects: It’s easy to overlook the fact that most of our expenses are not spent on our established projects but rather on those recently launched (such as DoNotWait, HomeSecuritySystems, WhatIsDividend, CoveredCallETF’s, etc) and also some soon to be launched ones. Even though these costs will only payoff in the coming months and years, we think these are no-brainers. Looking at our costs without considering the future would not make sense. Of course, many of you do not know about these other projects which is why I decided to write about them here.

Quality Content: Running multiple blogs as well as niche sites and others is a challenge even for a creative brain like Mike. There are only so many hours in each day right? Having someone like MD who can write quality content that is interesting is certainly worth the investment for us.

VA’s: As Mike has written about, we have 2 VAs (one full time!) and they are able to help us in so many different ways. Not only do they help us by managing things that we’d have to do for us to focus on specific projects but they are also able to do research for our projects, to manage specific tasks, etc. Running our growing business without them would be unthinkable without quitting our day jobs.

As you can see, it’s easy to draw conclusions from our costs and perhaps even question our profitability. I prefer to see it in another way. We are reinvesting, in the smartest way we can, pouring profits back into the company. If our revenues double in the coming months, you can expect costs to follow a similar pattern. That would translate into more and bigger projects of course. Why would we take in an extra few thousand now if those can translate into thousands more paid every year by reinvesting them into the business. Honestly, what stock or financial investment could possibly return more than our reinvestments into our online company? If you know of one, let us know.

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Comments

I think you are doing a wonderful job and it makes sense to reinvest into the business. As long as revenues are growing more quickly than expenses, you could do this forever. There comes a point when that ceases to happen, but that is the time to re-evaluate those expenses and eliminate those which are unnecessary. Companies are doing this all the time.

by: The Financial Blogger | June 21st, 2011 (10:11 am)

the cool thing is that our expenses are pretty stable right now and our income keeps increasing. At one point, I guess that we will be able to cut down on our expenses and start cashing some profits! hehehe!

reinvesting your business earnings back into the growth of your business is one of the best decisions in my opinion from every aspect. if you can afford to forego the income, do so today for a better tomorrow

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How do you manage to determine how much to spend? What kind of payback period do you use on capital expenditure?