By Jeffrey I. Shavitz
Affinity Solutions Inc.
Huh? Did I really just suggest in the title of this article that we waste money? Isn't this about the most counterintuitive thing you've ever heard … especially in an article geared for the ISO and merchant level salesperson sphere, where every dollar should be strictly accounted for in the hopes of using money wisely to grow our businesses?
Despite what you might think, I have a theory that, in business, it's sometimes a good idea to "waste" some money if you want to see serious growth. It might surprise you even more to know I think this is especially important in a startup business or ISO you are forming that may not even be cash-flow positive yet.
When I lay out my budgeting process, it's fairly easy to quantify the main categories. They include the usual vital items: employees, marketing and rent, for example. But I also always make sure I include a "waste money" line item.
This "waste money" category is reserved for use doing something totally outside the box of conventional thinking. It is our risk-taking capital, earmarked to be spent in support of something that could – and most likely would – fail. As long as it was also a concept that could bring us excellent results if the idea took fire and worked out, it could apply.
As Starbucks Inc. Chariman and CEO Howard Shultz said, "Risk more than others think is safe. Dream more than others think is practical."
Depending on your organization's size, the number you put here will vary. The good news is that it's entirely up to you how much you decide to allocate to this portion of your budget. For example, when I started my first ISO, Charge Card Systems, (now I have Alternative Merchant Processing, a high-risk organization) I allocated $10,000 to the high-risk category. This was while I was running a young startup with little revenue and even less profit. As we grew into a more mature company, the amount in that account was closer to $100,000 annually.
I have to admit, most of the time, the money in the fund – when we chose to spend it – is lost. Another term for this is "invested." Whatever you call it, these investments have most often resulted in zero return. However, that fund also occasionally brings us a home run. I'll tell you about two of them.
How did I choose to "waste" money profitably? Years ago, most credit card processing companies were only attending "end user" shows, that is, tradeshows for restaurants and retailers. That's when my web developer said he'd heard about a national web developers' show in Las Vegas.
I was intrigued by the possibilities of reaching outside our industry's normal tradeshow box. However, coming from New Jersey, staying for a three-day show – with the cost of travel, hotel, booth space and two employees – was going to cost us more than $10,000. That's a significant amount of money for almost any startup business, especially if it's not funded by private equity or venture capital firms.
Instead of being overly concerned about every dollar, I knew my established waste money fund contained $10,000. Having this fund available made the decision to attend much easier. I'm certain I wouldn't have gone to that show if it would have meant pulling the funds from another part of the company's still-thin budget.
The $10,000 evaporated within those three days with little to show for it. I worked as hard as anyone possibly could, meeting every potential client at the show and making sure they all walked into my "luxurious" 10' x 10' booth. (I could barely stand in front of it without bumping into the other exhibitors.)
Still, I called out to people who were walking by instead of stopping by and politely looking at my tri-fold brochures. I also had a fish bowl to attract business cards, complete with a promotional offer for a Caribbean cruise for a business card drawing at the end of the show.
Following the conference, I continued working. I made my follow-up calls, sent out follow-up emails and – it worked. I established some great relationships from that one show. Since then, that initial $10,000 has grown exponentially, turning into hundreds of thousands of dollars in revenue over time.
The risk I took making this investment paid off. That time. Many times, waste money fund investments are a bust. Still, when I look back over my career and my use of that fund, I know it has provided a significantly positive return on my total investment.
Another way I've used the waste money fund with good results is covering travel expenses to see potential prospects. In this age of technology, Skype meetings and video conferencing, it probably doesn't seem to you like there's much reason to travel across the country to have face-to-face meetings anymore.
I'd argue, instead, that building a personal relationship of trust with a prospective new client is paramount to my success – and this only really happens by looking a potential client or vendor in the eye, face to face. Taking the easy technology-driven way out is … well … easy. But when you can get out of the office and interact face to face with people, so much more happens. The conversations are more engaging, as is the laughter. The relationship vibe strengthens and grows every minute you're engaged in this manner. It is entirely different than a phone call, where there's no body language you can use or observe and no eye-to-eye connection.
Get out and see people. It's still important today and, with fewer and fewer people doing it, you'll stand out even more in the memory of every potential client you meet when you do. Your waste money fund is a great way to finance these meetings.
I want you to understand that it's important to keep some money on hold, if possible, just for the oddball opportunities that will pop up in business from time to time. There's going to be a moment when you feel in your bones that an opportunity – one that seems totally unrelated to whatever it is you ordinarily do – is actually a perfect fit. If you don't have at least some money you can waste without worrying about seeing a return, you can't give it a try. You might not, for example, attend a tradeshow or fly to meet an important potential client one on one.
Since implementing the concept of this waste money fund, I've been surprised by how few other people I meet have considered having one. Most wouldn't think twice about putting money away for the occasional emergencies and unexpected expenses that crop up when launching a new business. Almost no one ever seems to think of also putting some money aside to use on ideas and opportunities that might initially appear wild on the surface, but also just might kick back a return on investment of many times what you spent.
It's important to always make certain you're in a position to take advantage of unpredictable, possibly risky opportunities when they show up and make sense. These funds make it possible to truly think outside the box. A waste money fund is the key to that box – the key that can let you out so you can go where potentially huge hidden profits reside.
Whatever you do, keep pushing the envelope. Look for new opportunities. Don't worry if your latest idea sounds crazy or feels like a money waster. Stay within your waste money fund and budget, of course, but don't be afraid to throw some money at an idea if there's also a reasonable chance it could work well.
You could look at putting money into this fund as something akin to another form of insurance if it makes it easier. Call it "unexpected opportunity insurance," get it funded and get rolling. In the words of a famous maker of athletic products, "Just do it," to which I'd like to add: and never look back.
Jeffrey I Shavitz is the Managing Director of Affinity Solutions Inc. and its Navigator product. His experience in payments including co-founding Charge Card Systems Inc. that was sold to Card Connect in 2012, Alternative Merchant Processing, dedicated to high risk merchant processing and Charge Card Funding involved in the cash advance space. His first book "Size Doesn't Matter- Why Small Business is Big Business; Profit NOW from the Small Business Boom!" will be released July 2015. For more information, he can be contacted at 800-878-4100 or firstname.lastname@example.org
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The Green Sheet Inc. is now a proud affiliate of Bankcard Life, a premier community that provides industry-leading training and resources for payment professionals. Click here for more information.
Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.Prev Next