It is a cost or is it really an INVESTMENT?

Profit First Club Newsletter

Hi everyone,

Stephen Edwards here from Grow Accountants (formerly CTA). This week, I’m changing things up in the Profit First Club by focusing on deeper dives into specific topics, rather than covering several points at a surface level. I’d love your feedback—let me know if there’s a particular area of Profit First, business, or finance you'd like me to explore in future newsletters.

For clients of Grow, I’m excited to announce regular live Q&A sessions, starting soon, where you can join in to ask questions and really dig into the nitty-gritty of Profit First and business strategies.

This week, I want to explore two key topics:

Cost vs. Investment: Understanding the Difference

When managing business expenses, it’s vital to distinguish between a cost and an investment. Many people think of investments purely in monetary terms—stocks, property, or gold. But in business, an investment often means spending money in ways that provide measurable returns, whether that’s increased revenue, efficiency, or peace of mind.

Take Profit First as an example. Some people think it’s all about cost-cutting, but that’s not the full story. Profit First helps you cut the “fat” from your expenses—those unnecessary costs—while preserving the “muscle,” the essential areas that drive growth and success.

Here’s a real-world example from our business. One of our largest expenses is our practice management software. It costs roughly £1,000 a month, plus additional costs for supplementary tools. Recently, I conducted a thorough review to see if we could save money by switching to a cheaper provider. On paper, it looked like we could save around £10,000 a year.

But when I dug deeper, I realized that switching would reduce efficiency across our 12-person team, potentially costing us £2,500–£5,000 per month in lost productivity. The upfront savings weren’t worth the long-term impact.

This principle applies to all areas of business. For example, team members aren’t just a cost—they’re an investment. A strong team drives growth and supports you in building a sustainable business. When reviewing your expenses, ask yourself:

• Is this a cost or an investment?

• What’s the return I’m getting from this expense?

• Does it save me time, improve efficiency, or enhance my peace of mind?

Whether it’s software, team members, or even your own time, think critically about what’s adding value to your business versus what’s simply draining resources.

Profitability and Business Models

Profit First encourages us to allocate money wisely by using "pots," but it’s not just about squeezing costs. Once you’ve cut unnecessary expenses, the next question is: Is your current business model truly working for you?

Over time, Profit First can help reveal whether your business is structured to deliver the income, profit, and lifestyle you deserve. For many clients, this insight comes after a year of working with the system, but it can happen sooner.

Here are some questions to consider:

• Is this the right model to achieve my goals?

• Are there areas of my business that aren’t profitable?

• What could I change or optimize to improve results?

Sometimes, it’s necessary to trim unproductive areas of your business, like McDonald’s founders did when they simplified their menu to focus on what was most profitable. What could you “prune” in your business to make room for growth?

Remember, the ultimate goal is not just more profit, but a better lifestyle and peace of mind. If your current model isn’t delivering, it may be time to rethink and restructure.

I hope these deeper dives into cost vs. investment and business model optimization have given you something to reflect on this week. If you have any questions or topics you’d like me to cover in the future, feel free to reach out.

Have a fantastic week,
Stephen

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