Who do you picture when you think of a businessman that is only obsessed with making money and hoarding it away by the millions? Ebenezer Scrooge, by any chance? Yeah, me too.
In one important way, Mr. Scrooge was a massively successful entrepreneur. He had hordes of money hidden away, more than he would ever need, and every day his cash pile grew. Seemingly without any marketing strategy or real business plan, Scrooge became one of the wealthiest men in Victorian London. If he tried the same tactics today, however, he’d find himself broke in a matter of weeks. I know this because of one major lesson I’ve learned about modern online business: You’ve got to spend money to make money.
It’s one of the most overused business clichés, but it’s very true. Understanding how to spend profit is what helped me grow MOBE from a tiny one-person company into a $100 million company with over 180 employees all over the world. And it’s why I know Mr. Scrooge couldn’t possibly use the same principles to become a millionaire today.
Penny-Pinching Doesn’t Grow Millions
Though Charles Dickens didn’t go into massive detail about one of his most popular literary antagonists, it’s widely assumed that Ebenezer Scrooge was a money lender. He gave money to other entrepreneurs and heads of household that needed it, either to start a business or keep food on the table during the lean season. Scrooge probably made money by charging high interest rates and securing high-value collateral in case his clients couldn’t pay him back. The result? Piles of cash and random repossessed property.
So what’s so bad about hanging onto your profits? Nothing, really. But if you want your business to grow into a six or seven-figure company, it’s not a strategy you should be using, no matter how appealing it is. Everyone that goes into business for themselves counts down the major milestones of entrepreneurship: When you earn $10,000, then $100,000, and finally, that amazing first $1 million.
You may think reaching these goals and growing your business further is all about sales and savings, but you’d be wrong. Growth is directly dependent on how you develop your company’s infrastructure.
Strangely enough, it can be difficult to scale past your first $1 million in earnings, even when you keep up the same strategies and systems that got you to that point in the first place. I realized this myself when MOBE made its first million dollars. I was incredibly proud of my efforts and loved seeing that million sitting in my bank account every day. But as the weeks and months moved on, very little changed on that bank statement.
As much as I wanted to hang onto that money as a kind of trophy, I needed to put it to use if I was ever going to reach the next seven figures.
Reinvestment = Higher Profits
There are two essential things you need to know how to do if you want to continue scaling your business past the six-figure mark: reinvest in the right departments; and build relationships with clients. Obviously these are skills that the richer-than-rich Ebenezer Scrooge just didn’t possess, and that’s why he’d be a pretty poor entrepreneur these days.
The first thing business owners need to understand about growth is the value of their marketing. With MOBE, I paid careful attention to which marketing channels were lucrative, and which were just a waste of time and money. Whichever channels and ads were successful, I made note to reinvest a portion of the company’s monthly profits back into them. The more I spent on lucrative marketing, the more profit I received for my efforts.
I’ve continually taken money from profits and reinvested in marketing, and MOBE is now worth $100 million. So, what if I’d copied Mr. Scrooge’s business plan? I would have deposited my profits and kept them untouched in my bank account, and all future profits would be based solely on the first wave of marketing I’d done. There would have been zero growth, and minimal profits in the last couple of years, and probably nobody would even have heard of my company.
The point is, penny-pinching is a pretty awful way to handle your money.
Relationship Building Is the Next Essential Step to Business Growth
When you get started in business, it’s easy to put an average amount of effort into your customer service and not bother getting to know your clients personally. If you want to break past the six-figure barrier, however, customer relationships become more important than ever.
Top MOBE consultants build relationships with their customers by inviting them to webinars and events, sending them new industry e-books, and always making time for a chat and a handshake. How does this relate to larger profits? Happy, engaged, repeat customers are much more likely to continue spending money with your company than customers who don’t feel like you are personally invested in their success and wellbeing.
If you are a MOBE consultant, you should be attending events and meeting your team members face-to-face. I have one consultant that keeps coming back to events every year to meet his own clients and build those crucial relationships. When people get the chance to meet the person they’re buying from, it gives all of them the chance to build a team community that can progress and set goals together.
Scrooge Was No Team-Builder
It’s common knowledge that Ebenezer Scrooge was a grumpy man with no friends, so it’s safe to assume he didn’t bother extending a hand to clients or getting to know them. Where he could have built a strong partnership with Bob Cratchit, instead, he ostracized his employee and gave him minimal responsibilities. I know times were tough in Dickens’ world, but these days you need to treat your partners and customers with respect if you want to survive.
Don’t Be a Scrooge
Kyle Taylor, CEO of The Penny Hoarder, ironically suggests that business owners reinvest about half of their profits back into the business. Successful business owners in all corners of the world agree with this approach, since most of them followed the same advice.
I’ve learned to use the same method when growing MOBE, as well as to build a great support team, delegate most tasks, and spend time meeting both employees and clients. More than anything, my time with MOBE has taught me the importance of reinvestment in order to meet my six and seven-figure profit goals.
If you want your business to grow as big and profitable as possible, you’ve really got to be the anti-Scrooge. Smile, make friends, and stop hoarding your cash!