Startup Diaries: Smart Investing Is Better Than Smart Saving When It Comes to Business

[Startup Diaries is a new original series of articles from Yahoo! Small Business Advisor that chronicles the day-to-day and week-to-week struggles of a variety of startup and new small businesses.]

Amanda Kaiser and her husband purchased a struggling New Orleans coffee shop in October 2011. After nearly a year in business, Hurricane Isaac hit in August 2012, causing significant property damage that has closed the doors at Avenue Cafe.

Before owning my own business I was always perplexed as to why businesses, especially large corporations, were not more money savvy. In regards to my personal spending I was forever impressed by how far a dollar could be stretched by bargain shopping and cutting costs. As an undergraduate at Tulane University, I felt that if only the university would be more financially conservative they could easily cut tuition costs that left most college graduates in debt. However, after owning my own business I can see now how those who are great budgeters and savers on a personal level cannot always apply those same principals to their business.

When my husband and I purchased our coffee shop it was seriously struggling -- with weekends as the slowest period, due to the fact that weekday customers were typically nearby business people who were not around past Friday afternoon. We saw no reason to pay more than one employee per shift on Saturdays and Sundays, as there was typically not enough business to make it necessary, nor enough sales for it to make financial sense.

After a little more than two months, I stopped in one Saturday morning to drop off a few supplies and was shocked to see the place completely slammed as the lone employee struggled to pull it off. Now this particular lady was something of a superstar employee, having previously worked at the busiest chain coffee shop in New Orleans, but even she could not be expected to handle this incredible volume on her own. I had my two small children with me that morning, and could only stay long enough to catch her up, but I learned a very important lesson.

Obviously we were now successful enough that two employees were necessary, but waiting until after we absolutely needed more than one employee to change the work schedule was a big mistake. In a household it would not make sense to spend money before it is needed, but in a business I could have seriously ruined my chance at growth by not setting myself up for success from the beginning. The hardest part for most business owners, especially new ones, is simply getting people in the door. Once that part is accomplished you would hate to lose potential regular customers by being insufficiently staffed.

This is when I realized my money-management skills that had helped me in my personal finances did not translate into the business realm the way I had predicted. Businesses need to be a step ahead. They need to have the inventory and employees to meet the demands of customers when they first come in. A business that is always playing catch-up or seems like they are only half invested will not be able to hide that from customers. I was really scared of the financial risk that going into business requires. In my mind I always had a backup plan or exit strategy, because I felt it was the smartest choice.

In the business world you truly have to be all in, not only with your work and commitment, but financially as well. As I was coming to this realization it finally hit me why big businesses had always seemed as if they were over-spending. Tulane certainly spent a good deal of money outside of the classroom with entertainment, food, and other extras for students, but it nurtured the university environment that helps create lasting memories. By not doing this Tulane would risk not attracting as many incoming students, while also not building the necessary ties to future alumni who are counted on to make financial contributions. What seemed like over-spending to me was actually making investments in the future.

After my experiences owning my own business, I know that if I ever go into business again I would need a business partner that would push for smart spending that allowed for growth.

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