You Have to Spend Money to Make Money, the Saying Goes

It’s true: you can build a business and even market that business for free. You might even find a small amount of success. If you want to find real success, though, and earn a real living you’re going to have to spend some money. Moreover, it is better to spend money now to find success later than to try to scrape money together later when you’re trying to avoid failure.

This is true of any industry and business type. Just ask the musicians who have to buy instruments to play and equipment on which to record their songs. Ask the retail shop that had to lease sales space and pay for the inventory that currently stocks the shelves. Ask the tech genius who had to buy the materials with which to make his product prototype. It is true all over. It is especially true when it comes to marketing and promotions.

For some people, going after money and finding financing is easy. Some have found ways to seek out money from very early ages. For the rest of you, accepting the fact that building is costly is going to take some work.

“But I can build a blog for free on WordPress and tweet and post on Facebook for free,” you might say. “Why would I spend money on an ad campaign, I can just create a viral video or use guerilla marketing to spread the word about my business at almost no cost!”

Here’s the thing about using free methods to promote your business: they are temporary. When you use free methods you are entirely dependent upon other peoples’ mercy. You have to trust that free website host to stay afloat themselves (and, hopefully you’re okay with them putting their own ads on your stuff. How else would they make money for the space your site is eating?). You have to trust that your messages will be seen by your Twitter and Facebook followers. Facebook is already well known for throttling the messages of users who refuse to pay them.

Even if the sites and feeds operate perfectly 100% of the time, you have to trust that a viewer will remember your posts and to check your site every now and again. The human memory is a fickle thing. Worse, the human attention span is always getting shorter. That viral video you made might have gotten a million hits yesterday but today people can’t remember your YouTube channel’s name.

The point of paying for advertising and marketing materials is to create something that you control and that will last. It is to give users messages that will stay with them. Why else do you think businesses used to send out calendars to everybody every December?

Of course in today’s world, with people managing their time and calendars digitally, wall calendars probably won’t get you very far. You need to think of things that people will actually use and want to have on hand. For example, buying a gross of the Memory Suppliers’ credit card USB drive branded with your company logo and web address would provide people something that they can actually use in their daily lives. Another good idea is a branded notepad that they can keep in their bags or on their refrigerators to help manage lists and messages and notes. Water bottles, especially if they are made well, are often well received. If you have the room in your budget, shirts and totebags are some of the best things you can give away.

Spending money is good for your business. It is what helps you get the highest quality materials for your products. It is what will help you project the best image of your company to potential clients.

It is also important to remember that the important part of the “you have to spend money to make money” cliche isn’t really the “spending” part, anyway. It’s the making part. Businesses that can bootstrap are great and might even earn a few bucks now and then. Businesses that see the value in investing in themselves earn a profit.

 

 

Nate Ritter lives in San Diego, CA who popularized the #hashtag and creates scaleable web applications for a living. He also does miles and point hacking to enable cheap travel for his family. More here →

5 Comments on "You Have to Spend Money to Make Money, the Saying Goes"

  1. Chinarut says:

    Hey this was a good read – given it’s Z-day (Zeitgeist) wkd, can’t help but wonder if you’ve given some thought as to how these precepts work as we transition into a resource-based economy & transform our whole sense of “free?” Was originally going to tweet yr article & decided this question is a bit on the fence & didn’t want it to be misunderstood given I agree with everything you are saying in today’s economy!

    • Nate Ritter says:

      @Chinarut, thanks for the comment.

      In short, money is a “resource”. In fact, it is THE resource (other than time). So, when you say “resource-based economy”, I’m not sure I get your implication or question. Having a common currency, in whatever form, is required to play the game. The only game changers I see at the moment are really (1) people valuing their attention and time more, and (2) having/giving permission to communicate (permission marketing).

      If you start with nothing and want to communicate with potential customers quickly, there are very few ways to do this efficiently. Spending money on advertising works wonders for this.

      The bigger issue in my head is not about getting the eyeballs, it’s actually about retaining them by offering value in trade for that attention. This gives you the permission to communicate with people about your product/service. Without giving value, any advertising you do is wasted. Without having permission, you might get someone’s attention once, but it is fleeting, and in the end you have an unsustainable business.

      Perhaps I’ve misunderstood your question, though. So, by all means, please feel free to clarify.

      Thanks for the awesome comment.

  2. Aaron says:

    Hi Nate,

    I’m chiming in on the conversation between you and Chinarut.

    I am the person that shared with Chinarut about the possibility of a Resource Based Economy.

    This is a possibility that was created by an industrial designer named Jacque Fresco.

    What Jacque distinguished is that money itself is not a resource. Jacque gives the hypothetical example of an island with enough natural resources on it available to support 100 people. As long as the people on this island manage how they consume these resources (including their population size) and how they foster the renewal of these resources they could continue to live on this island indefinitely. However, if you took these resources away and gave them $1 billion (with no ability to trade the money in order to get additional resources from off of the island), they would soon perish.

    So Jacque basically identified a possible economic design that would ensure all humans’ needs being met while living in a sustainable relationship to the environment. From his perspective, money is seen as a tool and not a resource itself, and it is seen as an antiquated tool that has certain ecological and societal consequences. In a Resource Based Economy there would be an access abundance where people would have access to the resources they need when they need them (but they wouldn’t need to own those resources). Similar to how you have access to a shopping cart when you go to the grocery store or to a bowling ball when you go to the bowling alley, but you don’t need to own those items yourself. A Resource Based Economy is based on the scientific method as applied to social design. This type of economy would be organized around technical efficiency rather than market efficiency (the priority of profit). In other words, it would be a system based on efficiency of resources (natural resources and human labor resources) versus a system based on consumption. All technological designs would be open source, there would be no ownership, or even money at all. So, in terms of “permission marketing”, I guess I’m asking your permission to communicate more about what the possibility of a Resource Based Economy would make available for life on earth. If you grant me this permission, I can point you to a free online documentary that more fully articulates the possibility of a Resource Based Economy as well as the consequences of our current monetary/market system.

    Aaron

    • Nate Ritter says:

      Hi @Aaron.

      I haven’t looked up Jacque Fresco and his island example quite yet, but on the surface of it, it seems flawed. Of course they would perish without the resources on the island. Money in itself is not a resource. It is an in-kind tender for the resource. I feel like I’m missing something in that example because it seems obvious. I can’t really do all the things with money that the trade of that money represents when someone else takes it in-kind for food, toilet paper, or a knife.

      Regardless, your second paragraph makes it clear that (and I think everyone agrees) money itself is a tool, and not a resource itself. However, the tool that it is, in fact, represents some quantity of some actual resource in the economy.

      In terms of permission… consider the comment box the technical efficiency related to allowing you to share that information, even without asking me. ;)

      Share away, Aaron.

  3. Aaron says:

    Great, thanks Nate. Here’s the video link: https://youtu.be/4Z9WVZddH9w

    The section of the documentary that articulates the possibility of a Resource Based Economy is towards the last third of the film, but it’s important to watch the first sections first to get the train of thought that leads to the possibility.

    Jacque Fresco is the old man towards the beginning of the film says “this sh*t’s got to go”.

    Please let me know if you watch the documentary and if so, what your thoughts are.

    Aaron

 
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