Investment Mindset —Insights on Brand Building and Personal Financial Decision-Making
I started writing this with an Instagram post in mind, then it grew into a blog post, then it grew into something between an article and the chapter of a book because of its length. It’s long, I’m sharing a lot of things around financial decision-making, spending, investing, business. I’ve written about my own personal philosophy around these subjects, opinions I have related to how to approach a brand or a business (particularly if you’re starting out), personal behaviors around money too.
The origin of these thoughts I write, funny enough (and I say funny enough because I can’t believe how I ended up writing about so many other things), was a piece about Victoria Beckham (published in Financial Times’ How To Spend It magazine) and how her brand had just turned profitable after 16 years (that’s what led to my chain of thoughts).
My knowledge in finance and personal experience are the source of what I’m sharing, so anything I say is grounded in an informed and knowledgable opinion. I feel very comfortable talking about this, but I would like to give you some background because it’s easy to judge credibility (I know I do). So for those of you who don’t know me that well, I studied Business Economics, I have a Master’s Degree in Finance (with a thesis in behavioral finance, which is particularly related to what I write about because it studies the nature of human decision-making around money), I’ve worked in finance (as a financial advisor) during the first years of my career, and I’ve advised my clients in their decision-making around building their brands for almost 8 years now.
So my opinions come from this background. Not that I need to justify why I write what I do, but maybe I do, specially because finance is a very particular and sensitive subject. It’s my view and opinion on things, and it’s based on my experience — so as everything, take it if it serves you!
If you don’t want to read everything, there are a few take-aways at the end!
It’s the first time in the 16 years of Victoria Beckham’s brand that it turned a profit. My first thought was ‘wow 16 years, what a commitment to making it work’, the second was ‘it’s so great that they’re communicating that a brand like this was not profitable until just now.’
I know it appears to just be a comment on an article, but I find this little comment so important, because we don’t really know the behind the scenes of a brand. We just see what they are creating and think that they’re super successful, when in fact, they’re still not.
Just a small clarification —being profitable technically means that your revenues (sales) are enough (and more) to cover all of your business’ expenses (everything from the cost of the materials to the salaries of your team, store / office rent and expenses, marketing expenses, among others, but those tend to be the most representative) —and this is assuming you have no debt (if you do, you should also be able to cover your debt interests).
This is something really important for anyone starting a business to understand —businesses take time to become profitable, and if you want your brand / business to be a source of income to you, you have to take this into account in your plans. You have to have the strength (financially and emotionally) to endure it, and if I may add, you have to be adaptable enough to change decisions along the way if things are not serving you, or, invest (yet again) in doing things that perhaps weren’t done correctly.
I know that what I’m saying takes the ‘romanticism’ out of creating a brand —and just to clarify: you can create a brand just for mere pleasure and creative expression if you have the resources— but if you are thinking of your brand as a possible income source, then you have to incorporate this information into your life.
I can imagine you’re thinking ‘well, how long do I have to wait and how much do I have to put into the brand to see it through?’ You can try and calculate this with financial projections (it’s not a universal answer, the ‘how long’ and ‘how much’ is deeply related to the nature of your brand), but what I like to ask my clients (and friends) is that same question the other way around —how long are you willing to wait and how much are you willing to put to make your business work?
That’s the real question.
Because you can always make things work (improving your costs, improving your image and content, improving your product and strategy, investing in digital marketing), there are always things to be considered, adapted and improved, that’s what creating a business is about. And yes, you can do your financial projections and they will definitely give you valuable information, but the truth is we don’t really know how things will unfold. We don’t know if it will take a year, 3, 5 or 16. The only thing you can be mindful of and ‘control’ is your own resources —how long (time) and how much (money and energy) you’re willing to put into it. So the real question, again, is —how long are you willing to wait and how much are you willing to put to make your business work? Finance is not going to tell you that decision, trust me. It might give you an opinion, but you need to make that decision for yourself.
Another thought that crossed my mind around this topic is —don’t expect the brand or business to take off and be successful and profitable if you don’t put money into it. Of course you can start your business really small, putting a lot of your time and energy (those are the three resources —time, energy and money, if it’s not one, it’ll be the other), but one way or the other, you will have to put at least a bit of money into it too, even if you choose to do everything by yourself. If a branding is too expensive to you, you still have to create it, it can come out of your own time and you might have to pay a graphic design course. If a website is too expensive to you, maybe you can do it yourself but you still have to pay for the platform subscription. If hiring a photographer is too expensive to you, you’ll still have to have buy one of the latest iPhones or a camera and a tripod to create content by yourself (and invest the time in ‘perfecting your skill’). Time, money, energy —it’s always going to be one of the three. What you decide to do is up to you —I mean l’ve done almost everything by myself for a long time, partly because of money, partly because I was exploring myself in creative disciplines, and partly because I always thought that if I were to hire someone, with my high expectations, they would be very out of my league and budget.
All this to say that you can start a brand by putting mostly time and energy, but initially you will have to put at least something, and eventually you will have to be willing to invest more if you want to level it up. And you will hire people and don’t see immediate results in sales. There is this notion that if you invest in doing a great branding, then sales will come pouring in. No. A business is a construction, your branding is an absolute essential part of it, but you’re not going to get immediate returns. Investments don’t work that way.
Look, I’ve always been very careful about where I put my money, specially because unless you have a stable income or a very generous sponsor (like your family or your partner), money is limited and you have to take care of it. And even if you do have a stable income or a very generous sponsor you should be careful with your money too.
One of the greatest highlights and lessons I learned in studying and working in finance, is the investment mindset / behavior.
Our relationship with money is usually taught through a spending mindset or spending habits. You have to have a job to earn a monthly salary, pay your bills, and if you are lucky to have someone wise enough to teach you about savings, you also incorporate savings into this space. But the spending mindset deals with small recurrent outflows of money.
An investment mindset is different. First, investing is associated with doing a larger one-time payment, instead of the small expenses or lifestyle spending. It’s a bigger decision, and it feels more out of your control. It feels more like a leap of faith, because it’s a big effort, there are a lot of expectations around it, and you don’t really know how it’ll turn out. It’s like that feeling of when you decide to buy a house. Or when you decide to move countries. Or when you decide to have children. It’s a big life decision right? That’s the feeling around the investing decision. You are doing a payment that is ‘big’ for you, and you don’t know if it’ll pay off, when, or how it’ll turn out. But it’s important to you and you are willing to do it, without having certainty of the outcome. This last part is the key to making good decisions around money, particularly with the investment mindset. You are willing to do it without knowing how it’ll turn out. You have to learn to deal with uncertainty in a healthy way, otherwise it will lead to bad decision-making in the after math, because you’ll get anxious about it’s return, but you can’t really control it, and you start making rash decisions because you want to go back and do it differently, or try to ‘fix it’. If you got to this point, then you didn’t decide mindfully in the first place. A way to see if you are going into an investment with the right mindset is —-if you go into it with too many expectations, demands or wanting guarantees about the outcome, then don't do the investment. Wait until you feel like you are ready to take that ‘leap of faith’ without demands or pretending certainty on the outcome, because otherwise the after-math is going to be really hard on you, financially and personally.
Another lesson —don’t put everything that you have into one thing. Because if it doesn’t turn out, you will have lost ‘everything’, and it’s simply not a smart thing to do. This in finance is called to diversify (or diversification). A very common phrase is ‘don’t put all your eggs in the same basket’. Meaning that if you do and your basket is stolen or broken, you will lose all of your eggs. So with a business it’s the same thing —don’t invest ALL the money you have into doing ONE thing for your business, for instance a branding, or putting all your money into the samples, or hiring the best photographer for 10 photos. There are a lot of things to be done in building a brand / business, and for a long time, so you have to take into consideration all the things you’d like to do, see what’s within your possibilities and what’s important to you. Then the number itself (‘how much you put into each thing’) depends on you, your intuition and your type of business. I would love to tell you how much is okay to put into branding for instance, but the reality is it depends.
If I can dare to share with you a criteria, it would be having putting the investment mindset into practice —you have to be willing and able to do it without knowing how it’ll turn out. ‘Willing’ means that you are prepared to take that ‘leap of faith’ even if it doesn’t work out, and ‘able’ means that you are being responsible about the amount (you’ll be able to live beyond this decision, meaning it’s not going to bankrupt you and you’ll still have plenty for other things). That’s what I do with my own money. When I do these little investments for myself and my business, my criteria is ‘if I can spend this money and I still have money going forward, I do it’. I know it sounds very relative, but it is very relative. It depends on how much you have and how you value things. And if you sit down to think about it, you know how far you can go, you just have to be honest with yourself. Be mindful, listen to yourself, if it’s too much to handle then don’t do the investment now, wait until you feel ready. Make it so that it’s a decision and a ‘calculated risk’, not a mindless ‘I close my eyes and do it’ kind of decision, I don’t relate by that kind of mindset and you don’t have to either if it doesn’t work for you.
I will share with you a few ‘rules’ that are out there regarding business spending decisions (by spending decisions I mean those related to the monthly recurring expenses, not the one-time investments I’ve been talking about). Common rules for your recurring expenses are that ‘you should invest up to 20% of your revenues in marketing / advertising’ (closer to 15-20% if you are starting out, closer to 5-10% if you’re already established), and that the cost of your products should represent between 20-30% of your revenues (usually we do the inverse to calculate pricing —your price should be 3 to 5 times the cost of your product, so if your product costs 10 dollars to make, you should sell it at least at 30-50 dollars, to be able to cover your other expenses, which in general as I already mentioned at the beginning, are salaries, office / store rent and expenses, and marketing expenses), but this really depends a lot on your product, market segment and industry.
Coming back to the Investment Mindset. What qualifies as an investment and needs to be treated this way? Well, everything and anything that is a non-recurrent, big important payment (whatever you consider big and important is valid). It can be applied to your education (a course, a master’s degree), a wardrobe upgrade, hiring someone to do your branding or a consultancy, a photographer. In the case of a Digital Marketing Agency / Paid Ads it’s a bit different, it’s closer to the spending mindset, because you have to put money every month and eventually they should bring you results. So my suggestion with digital marketing / advertising if you are starting out and don’t still have stable / foreseeable revenues, is to calculate how much you can spend through 6 months (in this you can apply the investment mindset —calculate the number considering that if after the 6 months you didn’t get the results you expected (and were told), you can still endure financially and maybe even hire another marketing agency. What I would also do is try to analyze month by month how they’re doing, don’t expect sales the first month because it takes time for a strategy to work and for people to buy, but be mindful to see if they are doing a good job based on what you agreed, otherwise cut them loose and try with another agency).
Now a note on personal image and wardrobe, which I consider essential to any brand building (even if you’re the founder and you don’t directly appear in your brand —your brand is an extension of you, and you are an extension of your brand, so how you dress and present yourself is part of the brand image). So namely it’s what you spend / invest in your style (clothes, jewelry, makeup). It’s a very interesting topic because you can either approach it with a spending mindset, an investment mindset, or even both. The spending mindset would be the typical end of the month behavior of ‘I’ve worked hard for this, I’ve earned it, I’m going to buy something for myself’. Some people do this every month, and although I don’t do that myself, it’s fine (as long as you don’t overspend). So the spending mindset would be that ‘recurring’ kind of ‘reward’ for your work whenever you please or feel like it. Investment mindset would be ‘I need to level up my image so I’m going to invest in my wardrobe’. So you set a budget (again, with the investment mindset of ‘if I spend this amount I’m going to be able to endure later’), and what I do to be mindful about what I will invest my budget in is to prepare the outfits before-hand. So I look through the online stores and see what I would like to buy with that budget, and see if I feel the relation spending-return is worth it for me. I do this every year, once or twice a year (depending on how well my business is going). So if you’re starting out and it’s the first time you are doing this, maybe you’ll want to invest in having several outfits, so you’ll want to focus on a baseline wardrobe. I did this a few years back —I bought a few suits (pants & blazers), shirts, a few good quality t-shirts, a couple of pairs of shoes. I invested in what I now call ‘uniforms’ —my day to day outfits. I can wear them to a meeting, to dinner, to have coffee with someone, to go to an event. Then, you start building up from there. So during the year, within my ‘Spending mindset’, I might buy a piece of jewelry, a handbag I loved, a pair of shoes I loved, or even just go to a store and see what I find. But it’s ‘to add to what I already have’, the big purchase was with my yearly budget within my ‘Iinvestment mindset’. It is an investment mindset also because I buy things taking into account how they will impact my personal image and hence my business. So for instance, once I have my basics, maybe the following year, instead of prioritizing ‘having several suits or outfits as a baseline’ (because I already did that last year), I prioritize buying a blazer from a particular brand that is probably more expensive but will elevate the quality of my outfit, and even serve as co-branding by association (people see you’re wearing that brand, and that has an impact on clients / brand customers). This is how you start ‘elevating’ your wardrobe (or at least how I do it, because it also goes hand in hand with doing better financially as you grow). So maybe the following year, with the same budget, I choose to buy less pieces but better quality. And so on.
The beauty of this investment mindset is that you can take it into your life as a decision-making philosophy for everything. It is a very powerful thing (or at least it was to me) —you start to feel at ease with your decisions, because you are making mindful, clear, smart and controllable decisions with your money. And this doesn’t mean that you can’t enjoy your money or enjoy creating a brand. You know, as I’m sharing all that I’m sharing with you, I am also a very indulgent and intuitive person when it comes to money. I am NOT the kind of person that has a spreadsheet with their expenses. I hate the word control, due dilligence, accountability. So I understand if you read this and think ‘I’m not that kind of person’ —trust me, I’m not that kind of person either. So I’m not saying to suddenly become an accountant or a financial expert, I dare to say that nobody (creative at least) wants that. And I know at first taking care of your finances might feel a bit hard, frustrating and imprisoning even, but then it becomes liberating. At least to me it did, because it allowed me to be intuitive and indulgent AND take care of my money and feel at ease with my decisions. It’s a mindset that feels balanced, and in my case, aligned to my nature —because I don’t like overspending or mindless spending, but that doesn’t mean I’m a control freak, going through every expense and every little decision I make. There is a beautiful balance in between, which is where I stand —being free but understanding your boundaries. It’s a mindset that has allowed me to build the career / business and life I lead today. And I feel very at ease, happy, balanced, rewarded, and proud of it.
So here are a few take-aways and suggestions to incorporate the Investment Mindset into your life in a mindful, smart and caring way:
If you are thinking of your brand as a possible income source, you have to incorporate into your plans that it might take time for your brand to become profitable.
You can try and calculate with financial projections how long it might take and how much you have to put into it, but the question that really matters is —how long are you willing to wait and how much are you willing to put to make your business work? Because the truth is we don’t really know how things will unfold, and we have to be willing and prepared to endure that by knowing where our limits are.
Don’t expect the brand or business to take off and be successful sooner rather than later if you don’t put money into it. Of course you can start your business really small, putting mainly only your time and energy, but it’ll take more time, and you will probably have to put money into it anyway. Be prepared to do so, or be honest with yourself and calibrate your expectations.
Don’t put everything that you have into one thing. Diversify.
Investment mindset —you have to be willing and able to do the investment without knowing how it’ll turn out. Make it so that it’s a decision and a ‘calculated risk’, not a mindless ‘I close my eyes and do it’ kind of decision.
What qualifies as an investment and needs to be treated this way? Well, everything and anything that you want to. Education, wardrobe, business.
Incorporating the ‘Investment mindset’ doesn’t mean that you can’t enjoy your money or enjoy creating a brand. It means understanding your boundaries, and being creative and free in between those boundaries. It means taking care of your money and yourself.
