In our personal lives we understand the difference between spending and investing. Buying new shoes – spending. Buying stocks in Nike – investing. We can try to convince ourselves that some spending is investing when it likely is not. The elaborate shoe shelving as part of our closet renovation that will not be recouped – sadly, is spending. (Not to say that it’s wrong, just don’t delude yourself.)

Stating the obvious, investments generate a return in the future, preferably greater than the original expenditure. Spending does not.

Surprisingly, in our business lives, the lines are sometimes harder to see. Certainly there are expenses that need to be paid each month to allow us to operate and therefore are investments that generate our current level of income, be that electricity bills, software services, or paying your accountant and your taxes. But understanding where new initiatives will fall on the spectrum of spending to investing can be more challenging.

Many expenditures could go either way. Working with a designer to create a new brand that propels the business into new untapped markets – investing. Designing a new logo that doesn’t change your connection to potential customers or your internal sense of purpose – spending. To often, business spending is like a new pair of shoes, worn a few times then forgotten in the back of the closet.

On more philosophical days, I feel even poor outcomes are an investment, if there has been learning which allows a higher degree of success in future efforts. We’ve all made choices to try something new that fails to deliver the expected outcome. Only after the fact can many expenditures be determined to be spending or investing. Employee training, executive business coaching, new software, opening additional locations, or a new acquisition: all can provide growth and opportunity, or simply be money out the door.

So how do we move more our spending into the category of investment? Conventional business teaching suggests you define the expected outcomes and measure against that. In my experience, for many businesses, this is often difficult or impossible, and limits creativity. It may be appropriate for a software company or a widget seller, but if your business depends on long term customer relationship-building, a direct relationship between investment and outcome in terms of bottom line can be unclear.

(In CPA school, business options are compared against the fit with the mission, vision and values. All options with a poor fit should be dropped immediately. But all too often students are convinced by a high ROI or other positive metric.)

Constantly recommitting to agreed upon vision and values, and truly comparing proposed projects against them will keep you on a tighter course. This means you must know exactly what that vision is. If that vision and values resonates with customers, investments that align with vision will also resonate with those customers, old and new. For example, if a new CRM or communication campaign will keep us closer to our existing and potential markets, while demonstrating our clarity and commitment, this will turn become an investments rather than spending.

We don’t want to become like that airline executive that forced his staff to steal pens from hotels in order to do their jobs, or the office manager that cut elastic bands in half to make them go further, but it may be useful to review where our expenditures are being made and if they are truly bringing us and our customers closer together.

Yours in investment