Cost vs. Investment and the Importance of Planning

Jan 8, 2011

The Forecaster published an article a few days ago regarding the Town of Freeport’s reluctance to fully fund a request by the Greater Freeport Chamber of Commerce.  The article and the town’s decision touches on two key areas (cost vs. investment and the importance of planning) that we often address with Opus clients:

The Chamber asked the town for $36,000 to pay the salary of an executive director.  The town agreed to pay half and to allow the Chamber to come back later in the year to request more funding.  This is a classic case of needing to consider whether providing funding is a cost or an investment, which is something that we do frequently at Opus.  In other words, is spending a dollar simply a one-time expense or does it plant a seed of productivity that should yield multiple dollars over time?  It’s a simple question but one that our clients frequently overlook or under-analyze.  Without further information, it might appear that the town of Freeport failed to differentiate between a cost and an investment as chambers of commerce usually stimulate economic activity.

But the article goes on to state that the town’s caution stemmed from the Chamber’s failure to present a business plan or budget forecast in connection with its request.  That’s another issue that we often encounter here at Opus.  Even the best investments should result from developing an adequate plan.  What defines an adequate plan will vary.  If it’s your own money, you can go with your gut alone (although that’s not something that Opus would ever recommend).  If you’re asking other people for money, you shouldn’t expect less than what the town of Freeport asked of the Chamber.

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