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How to Make Spending Decisions in Uncertain Times

Jul 18, 2022 | 0 comments

Understanding Spending Stress

Every day, it seems, we are presented with opportunities to make investments in our business. Sometimes these are driven by something more urgent, and sometimes they are a passing suggestion that comes from a referral or a conversation and piques your interest.

Wherever the opportunity originated from, it always seems to create the same anxiety for the business owner that is left to make a decision.

Without contest, spending money seems to be the most stressful decision that business owners face on an ongoing basis, and that is not without reason.

Spending can be stressful for a number of reasons:

  • We are depleting resources, rather than adding to them (at least in the short term)
  • We don’t want to be wrong about where we decided to spend
  • We aren’t sure, or don’t trust ourselves to make the “right” decision
  • We are taught that it’s smarter to save rather than spend
  • We have old fears and emotions around money and access to it
  • We don’t want to be left with nothing or no progress
  • We don’t have a clear plan or enough information
  • We don’t understand our spending profile, or who we are when it comes to money (more on this in a second)

In our businesses, money has two main jobs:

  • To keep the lights on, and sustain our operations. This kind of spending helps us maintain the status quo, so we don’t negatively affect our current activities.
  • To help us grow. This kind of spending moves the business forward towards new goals (financial or otherwise).

Both types of spending are important and you should make sure you budget for both in order to keep your business moving forward towards your goals. 

Your expenses are budgeted first, and forecast based on current and planned operations.

Your growth budget should then be established based on your Spending Profile, and should be derived from a combination of your profit (what is left over after expenses and income are accounted for) and your growth plan.

(Arguably, you may have a third category assigned to retained earnings, and that’s a personal decision between you and your tax advisor to decide how much, if anything, you retain inside the business, and can be thought of as an expense category)

The desired end state is to be able to make growth and operating investment decisions with confidence, in a timely manner, to support your business goals

In a stable economic environment, it’s a little easier to stick to the plan and weather the ups and downs.

When things are uncertain, it is much harder to commit to decisions because fear takes over, and we often end up just deciding to do nothing, which usually puts us even further behind. 

Fear and uncertainty lead to stagnation at a time where progress is actually critical. 

You don’t want to get stuck riding the downside of the wave when things are less stable. On the contrary, your challenge is to find a way to be at the top of the crest of the wave so you are leading with growth rather than battening the hatches and rationing your resources.

You need to develop the confidence in your business so that you can make spending decisions quickly and in an informed manner, and maintain a balanced focus on stability and growth.

Easier said than done?

I have a three-part strategy for you to follow, but first you need to understand your spending profile. 

Spending Profiles

We all have a certain “money personality”, which is usually developed over time by everything from our childhood messaging around money, major life experiences, cultural and societal influences, and personality traits. 

Most money advice is directed at everyone as a homogeneous whole, but that’s actually not realistic. We don’t all process information in the same ways, and we have different needs to support our decision making. 

So, our strategies will be different based on which profile we identify with. 

I’ve outlined these here, along with some of the key considerations for each, including what you need in order to feel comfortable and aligned in your decision-making, what a buying decision cycle looks like, what you need to ask for to support your decisions, and how you should determine your most comfortable budget for investments.

Each Spending Profile has its benefits and challenges. The key is to ensure that you understand your risks and your opportunities, and support yourself with the resources you need to make healthy, balanced decisions. 

The goal is not to change your Spending Profile, but rather to understand it and your own needs when it comes to making decisions in our business.

The Cautious Consumer

The Cautious Consumer sees spending as a necessary evil, and experiences a considerable amount of anxiety around spending decisions, requiring extra time, extra data and extra reassurance in order to feel confident in making a spending decision. 

They will often use meticulous spreadsheets, ROI formulas, budgeting tools and economic indicators to influence their decisions. When they are buying anything, they will need to consider it for a lengthy amount of time to ensure it’s really what they need, and that they are making the right decision with the right vendor. 

This Spending Profile ensures they never overspend, and makes well-thought-through decisions, but may also miss opportunities for growth due to their delayed decision making (or making no decision at all), and as a result may cause their business to grow more slowly, or not at all. 

If you are a Cautious Consumer, you can balance out your spending activities so you can make more timely decisions with confidence. Your spending decisions are not only financial, but also emotional in that they can significantly impact your feeling of wellbeing and your anxiety or stress levels, so ensuring you have support in your decisions is of additional importance. 

Here are some tips for supporting your spending decisions:

  • Maintain a detailed financial plan for the business where you can see near-real time numbers for all of your business spending and revenue
  • Decide what priorities you will spend on for growth each quarter (an annual plan is too far out for accurate forecasting) so you can be clear on what you can make more timely decisions on
  • Ask your vendors for their input on ROI for the proposed products or services
  • Find a trustworthy business peer with another Spending Profile who can help you talk through and balance out your considerations
  • When presented with a spending opportunity, treat it like a project and give yourself a timeline for all the parts of your decision-making process, including financial consideration, strategic consideration, final decision, etc.
  • Always ask your vendors to provide you with all of the details they can provide you about what you are buying, so you are not tempted to delay a decision due to lack of information
  • At each stage in your process, check in with yourself and remain aware of any fears that may be affecting your decision, and assess whether these are real or likely, and how you will mitigate them
  • Avoid high risk purchases that have a considerable amount of ambiguity – no amount of assurance will ever make you feel comfortable in this spending and it will always feel like more of a risk than can make you feel comfortable
  • Always preface a sales conversation with a vendor by explaining that you will not make a decision in the moment and will require some time to come to a comfortable decision. If you feel pressured, it’s likely that you will not make the decision at all, and any smart vendor will appreciate and respect this. 

As a Cautious Consumer, your comfortable growth budget will likely fall between 15-20% of your profit. 

The Balanced Buyer

The Balanced Buyer sees spending as necessary in order to continue the progress within their business, but is not inclined to overspend or spend unnecessarily. They like to know they have made informed decision but is comfortable with a little bit of ambiguity. 

They will ensure they have reviewed numbers and the relevant data that is available to them, and that they have a level of confidence that there is a potential ROI on their investment, but they are happy with the knowledge that they have done at least a cursory review of the data and don’t need to overanalyze. 

They also recognize that not all investments will result in the outcomes they are hoping for, and are comfortable with that expectation, as long as it doesn’t constitute a significant portion of their spend.

Balanced Buyers often will not make a purchase “in the moment”, and will give themselves a little bit of time for consideration before committing to a purchase, unless they have done their research in advance, but they are motivated by executing on a plan so the spending decision becomes just another task on their list of to-do’s, so as long as it is thought through and makes sense, they will not hesitate to act on it once they feel they have enough information.

This Spending Profile usually experiences steady, consistent growth and is usually pretty open to investment opportunities. They are great partners for both Cautious Consumers and Spontaneous Spenders to balance out their more extreme spending habits. 

If you are a Balanced Buyer and would like to see more rapid growth, you may need to step outside of your comfortable boundaries for spending budgets and timelines. If you choose to do so, ensure you are equipped with a solid plan for leveraging the asset you are acquiring so that you can feel connected to the decision and its outcomes. 

Here are some tips for supporting your spending decisions:

  • Maintain a clear plan of growth priorities in your business on an annual and quarterly basis, so you can make informed and aligned decisions to support your growth
  • Maintain a detailed financial plan for the business where you can see near-real time numbers for all of your business spending and revenue
  • Give your vendors a timeline for your decision so you can hold yourself accountable to a deadline, and you can manage their follow-up
  • Create a checklist of informational needs to support your buying decisions so you can know what to ask for from a vendor prior to committing to a purchase
  • Challenge yourself to invest in one small higher risk opportunity each year to practice stretching your spending portfolio into some more rapid growth and ambiguous opportunities

As a Balanced Buyer, your comfortable growth budget will likely fall between 20-35% of your profit. 

The Spontaneous Spender

The Spontaneous Spender sees all spending as an opportunity for growth, and is comfortable with more adventurous investment opportunities. They are inclined to make spending decisions in the moment after some quick calculations in their heads. 

This Spending Profile believes that you need to invest in order to recognize returns, and sees higher spend as a challenge to ensure they get higher growth. While they are quick decision makers, that doesn’t necessarily mean they are reckless. 

Quite the opposite, actually. They are often experienced and informed, and may maintain rigorous data inside the business, but just have a higher tolerance for risk than their more cautious peers, and are motivated by the need to outperform their investment. 

Where the Spontaneous Spender may run into challenges is when they haven’t fully considered all of their options, and when their decisions aren’t fully aligned with the growth plan for their business. They also may have a tendency to collect too many “opportunities” than they can manage and leverage successfully all at once. 

Having a more adventurous spending profile isn’t necessarily a problem, and can often lead to more rapid growth. In fact, the Spontaneous Spender often needs the pressure to motivate them to perform. 

The trick is to balance out the spontaneity with some stable, consistent growth opportunities so as to ensure the steady progress inside the business, and to ensure their growth efforts can be effective.

Here are some tips for supporting your spending decisions:

  • Make yourself a stage-gate model to follow for rapid decision-making, which reflects the priorities for the business and some of the habits you want to build inside your decision-making, and that ensure you’re not taking on too many opportunities to be effective (or that blow your budget)
  • Find a trustworthy Balanced Buyer who can help be a “voice of reason” to talk through your priorities when opportunities arise
  • Give yourself a mandatory “cooling off” period when making major spending decisions, whereby you will work through your stage-gate model and growth plan to confirm you’re making a productive decision
  • Give yourself a time and money budget per quarter to work within and spending rules that give you the permission to re-engage those opportunities next quarter
  • Practice saying “not no, just not right now” to at least two opportunities each quarter
  • Allocate a part of your growth budget to higher risk, higher growth opportunities that may or may not reap immediate rewards, to activate the risk-loving side of your Spending Profile, which motivates and drives you forward
  • Stay organized and knowledgeable of your numbers and how they impact your growth

As a Spontaneous Spender, your comfortable growth budget will likely fall between 35-50+% of your profit. 

The Spending Confidence Strategy

So how do we build our spending confidence?

Let’s dive in. Before you make any spending decisions, first understand your spending profile, and then get clear on your business foundations, thoughts and financial boundaries. 

Your goal is to ensure that all of the things that don’t have to be uncertain are not, so you can make decisions from the most informed and confident place possible. 

When things are uncertain, it makes it much harder to make decisions and so we often end up just deciding to do nothing, which actually leaves us further behind and lagging. 

Fear and uncertainty lead to stagnation, at a time when progress is actually critical. 

There will always be some uncertainty, but your goal should be to remove as much of that as you can before you are faced with any decisions. 

The Spending Confidence Strategy will help you create the least amount of uncertainty in your investment strategy, so that you can focus solely on the attributes of the opportunity in front of you in order to make a confident decision.

Step 1. Get Your House in Order

First, you need to have a strong understanding of what you’re trying to build. Without taking the time to define where you’re headed, it’s virtually impossible to know if you are making the “right” decisions or not, and you then risk making investments in a bunch of disjointed opportunities that will only dilute your efforts.

  • What are your priorities?
  • What are your constraints?
  • What is your vision?
  • What are your goals?

When you are clear on where you’re headed, then you need a plan for execution that can help you ensure you’re not making decisions that are out of alignment with your goals.

Finally, you need a consistently updated and transparent understanding of your business financials so that it’s always clear how much you have to work with. This takes the emotion and judgment out of your financial decisions and allows you to make quick decisions from a place of information rather than always guessing.

Do not make financial decisions without having your house in order. 

(My Profit Plan is a super helpful, simplified tool for keeping your numbers updated and focused on your business priorities)

If you have your plan in place, you will always make decisions that ensure your investments will always be focused on your top priorities and will require very little analysis or debate.

Step 2. Get Your Thoughts in Order

Money is an extremely emotional topic, and we all have thoughts and feelings about it, no matter how we grew up or what our experiences have been.

You need to be clear on, and conscious of, the thoughts and emotions that come up for you around spending. Not so they can be necessarily changed in the moment, but so that they can have less impact on our decisions. 

You need to decide how you are going to manage your thoughts that come up during a decision-making process and consistently practice moving through this practice.

Here are some questions you might ask yourself when you feel resistance/fear/shame/guilt around spending:

  • What does it mean if I am “wrong”?
  • Where does my shame/fear/guilt/judgment come from?
  • What am I scared of?
  • How can I practice trusting myself in this decision?
  • What am I willing to accept is true?
  • What in my history is influencing my beliefs about spending?
  • How will I know if I have made a good decision?

Identifying what our thoughts actually are helps us develop helpful new thoughts. I have always loved Byron Katie’s The Work framework for managing these thoughts.

She asks:

  1. Is this thought true?
  2. Can I absolutely prove without a doubt that it’s true?
  3. What would be a more helpful thought?
  4. What happens to me if I think that instead?

When you can master your thoughts, you can master your decision making, and get really clear on the facts vs. the emotions behind your decisions.

Step 3. Create Your Spending Rules

The last step to creating your spending confidence is to establish some parameters around what you will spend. With some rules in place, you will have all of the information you need in order to decide whether or not you should consider the investment on the table. 

Each of these rules is a very personal choice and should be established based on your own comfort levels and based on your spending profile. There are no “right” answers to any of these questions, only the answer that suits you and your goals best.

Do not rely on external guidance to tell you what you “should” allocate for these rules. It’s very important that you establish them based on your own data and desires.

Rule #1: What percentage of profit feels like a comfortable number to allocate to growth vs. operations?

Rule #2: What will you do if an investment exceeds your allocated growth budget?

Rule #3: Is there anyone else who needs to be included in a spending decision? For which spending range? 

Note: Be aware of how you answer this question, and ensure that including someone else is not actually deflecting responsibility for your spending decisions. You’re a leader! You can do this on your own!

Rule #4: Do you need a “cooling off” period when you are faced with a decision? What’s the right timeframe to ensure you are making an informed vs. and emotional decision?

Rule #5: Who will you buy from? What do you need to know about them before deciding to buy? What values do they need to uphold for you?

Rule #6: Do you always need to be able to establish a quantifiable ROI? Are you comfortable with investments that will improve your business in less tangible ways?

Thinking through these rules in advance of any major spending decisions will help you respond to opportunities with confidence, even if you decide that this particular opportunity is going to break all the rules.

You want to be informed, intentional and aligned to feel comfortable with any decision you make.  Working through all three parts of the Spending Confidence Strategy will ensure you are in fact informed, intentional and aligned.

Pulling It All Together

We don’t always get to choose when investment opportunities arrive in front of us. But we can be prepared to respond to them in a timely manner for the greatest benefit to our business.

Developing confidence takes practice, so don’t shy away from decisions, and be prepared to say “no” if you decide (from an unemotional, informed and confident place) that that is the correct decision for you and your business. 

Remember that not every decision is just about the money.

It may be a “not right now”, if the timing doesn’t support your plans. 

Or it could be a “heck yes!” if the opportunity hits all of your criteria and your timelines. 

Remain open to all possibilities and use the tools available to you in order to arrive at the best answer for you. 

Work through the Spending Confidence Strategy in order, and arm yourself with as much certainty as is available to you when an opportunity arises.

  1. Understand your spending profile
  2. Get your house in order
  3. Get your thoughts in order
  4. Create your spending rules

When you have your strategy in place, you will approach every spending decision with confidence and clarity, and you will become more and more confident as you practice making money decisions. 

If you’re looking for help creating your growth plan, a 60-Minute Strategy Intensive would be a great way to get clear and focused on your path forward.


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Stephanie Hayes Business Strategist and Coach for Service-Based Small Businesses

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