Transcript

Hi, I’m Carmen Sognonvi.

Has anyone ever told you this?

“If you want to be successful in business, you have to invest in yourself.”

Invest in yourself. Invest in yourself.

Usually the person who’s saying it is trying to sell you a coaching program, or a home study course, or tickets to a seminar.

Now don’t get me wrong. I absolutely agree that as business owners, it’s critical for us to keep learning and growing.

But I see too many business owners being completely financially irresponsible in their quest for self-improvement. And that’s a serious problem.

Keep watching, because in this video, I’m going to come clean and share with you some of the mistakes I’ve personally made in this area.

Then I’m going to give you three rules to follow when deciding how much and whether to pay for professional development.

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By the way, for more useful tips on running a bricks-and-mortar local business, be sure to check out my blog at CarmenSognonvi.com.

Before I joined my husband in running Urban Martial Arts full-time, I had my own business where I did speaking and training on race and diversity. I experienced a lot of success when it came to building a big audience and gaining national recognition as an expert in the area. But I completely failed at making it work financially, primarily because I let my expenses get out of control.

What was the biggest category of expenses? Professional development. In my last year of business, I spent nearly one-fifth of my annual revenue on paying for business coaching, attending seminars, and buying home study courses. Sales-wise, that was my best year ever. But you want to know what my net income was that year? Non-existent. I ran a 50% loss.

When my husband and I first started Urban Martial Arts, we repeated this mistake, though thankfully to a lesser degree. We spent over $10,000 over the course of 10 months on 1-on-1 coaching. Now, it was nice to have someone to talk to each week in-depth about our business, and to ask questions. But the reality was that at the end of that 10 months, our numbers were exactly the same as they were at the beginning. In other words, we’d realized zero ROI from that “investment.” So we did the smart thing and cancelled it out to cut our losses.

So did I get any value out of the professional development I’ve paid for over the years? Yes of course! I learned a lot of things, many of which helped in our business.

But can I say that dollar for dollar, I always got a positive ROI on what I paid? No. Absolutely not.

Here’s the thing. Even though people always talk about professional development as an investment, it’s really not an investment at all. When you invest, you buy an asset like a stock or a piece of real estate. That asset is inherently worth something if you decide to sell it. Now that value may go up or down over time, but it’s there.

When you pay for professional development, on the other hand, what you get is information and advice. And that information and advice only has financial value if you’re able to use it to get a positive financial result in your business. But that doesn’t always happen. Sometimes it’s because the advice is just lousy. Sometimes it’s because it doesn’t apply to your business, or your industry, or your geography. Sometimes it’s because the info was good, but you just didn’t do the right thing with it.

In other words, professional development is not an investment. It’s an expense. And just like any other business expense, you should only spend what you can actually afford.

TWEETABLE:
Professional development isn’t an investment. It’s an expense. Only spend what you can truly afford.

Let’s say there’s a woman named Mary who works a job. By the time she’s done paying all her bills each month, she has no money left from her paycheck. Now, Mary really wants to buy a $1,000 designer handbag. Do you think she should do it? Of course not, right? That handbag is a luxury item that she just can’t afford.

But many business owners are doing the equivalent of this when it comes to spending money on professional development. They’re making little to no profit month to month in their business, yet they’re shelling out hundreds or thousands a month on expensive mastermind programs or info products. They think they’re investing in themselves, but in reality, they’re just like Mary, buying luxury items that they can’t afford.

Listen, I’ve made this mistake myself, so I understand what it feels like. It’s easy to get starry-eyed because as business owners, we always want to do better, and we believe that we can. Unfortunately, marketers know how to tap into these emotions to get us to buy things that we’re not always in a financial position to buy.

So let me share with you my three rules when it comes to paying for professional development.

Number one. Never go into debt to pay for professional development.

Debt sucks the life out of your business. Most of us can’t avoid taking on at least some debt when starting a business, but your goal should be to get rid of it as quickly as possible. And you definitely don’t want to add to it by putting coaching sessions or info products on a credit card. If you can’t pay cash for it, don’t buy it at all because you just can’t afford it.

Number two. Don’t spend more than 10% of your net income on professional development.

Your net income is a precious, precious commodity that you have to use wisely. You should be putting most of it towards things like paying off debt, building up cash reserves to cover unexpected expenses, investing in new equipment or hiring additional staff so that you can grow your business. So spend no more than 10% of your net income on professional development.

Now, this is important. When I’m talking about net income, I mean what’s left AFTER you’ve paid yourself a market-based wage. Many business owners kid themselves into thinking they have profitable businesses, but that’s only because they’re either taking no salary at all, or they’re paying themselves much less money than they would pay if they hired someone from the outside to do their job. So use the real net income number, not the make-believe one.

Number three. If you don’t have any net income, you shouldn’t pay for professional development.

If you’re a pre-revenue start-up, or if your business isn’t making a profit at all, then guess what? You can’t afford to pay for professional development.

Does that mean you shouldn’t grow and learn? Of course not.

But you need to learn exclusively from free resources. Check out business books from the library. Read free blogs. Watch free videos like this one. Attend free webinars. Network and get to know people in your industry and strike up relationships.

You’d be surprised by how many successful business owners are willing to share their knowledge with you for free. My husband and I do it all the time.

The bottom line is, professional development is important. But you need to be financially responsible too. Otherwise you’re going to put yourself right out of business.

TWEETABLE
“Manage professional development in a financially responsible way, or you’ll put yourself out of business.” via @carmensognonvi

One more thing.

I’ve noticed that the more successful your business becomes, the less of an urge you feel to spend money on professional development.

It’s usually struggling business owners who spend the most money on it, proportional to what they earn. They’re the ones who are in the most pain and they’re constantly searching for that magic pill to solve their problems.

But they’re also the ones who can least afford to pay for professional development. The more they keep paying for these programs, the more they keep themselves in financial struggle.

If you’re in this situation, here’s my advice to you. Take a look at all the information and advice you’re already received, and do an honest assessment to see how much of it you’ve actually implemented in your business. I think you’ll find that you’ve only implemented a tiny proportion of what you’ve learned.

If that’s the case, stop paying for more training. Instead, go back over the material you already have, and each week, implement one new thing until you start seeing some positive financial results. That way you’re truly getting the most out of what you paid for.

Now before I get to our question of the week, I want to let you know that if you found this video useful, I would encourage you to sign up to get email updates from me!

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And if you have a question you’d like me to answer in a future video, just send it to info@carmensognonvi.com.

Ok, now it’s time for our question of the week!

How do you decide how much to spend on professional development?

I’d love to hear your thoughts, so leave a comment below!

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