Thursday, April 3, 2008

Stop Falling for Hype

As a business owner you need to be wary. There are countless salesmen and marketing professionals whose sole responsibility is to separate you from your hard earned dollars. They will use every trick in the book to get you to buy. They will tell you that your business cannot survive without their product or service. They will flatter you or even threaten you into a sale. Don't fall for the hype! Fight the urge and, as Nancy Reagan taught us, just say no!

As the primary decision maker for your business you must be cautious how you spend your money. There are people who rely on you to make good decisions so they can keep their lifestyle in tact. Whether you like it or not, you are responsible to them and to yourself. So, make spending decisions based on real business needs, not on that awesome salesman's recommendation. Is there a valid, real business case to purchase? Can your company live without it? Will there be a genuine business advantage gained by the purchase? Will you be more efficient? Will it reduce expenses somewhere else?

All of these questions should be answered before you sign the check. But don't take the salesman's word for it! I realize this might come as a surprise to you, but some salesmen are not above lying to close a sale. So, make sure you check their claims. Look for reviews on the internet or in trade magazines. Find out if there is anyone else using the product or service and contact them to learn their opinions. You must exhaust every avenue before you hand over your money.

Obviously I am not talking about purchasing office supplies. By all means, buy that toner, paper and sundries. I am talking about expenses that exceed your petty cash budgets. I am talking about computer servers, software systems, new construction, electrical generators, and everything else that the accountants refer to as a capital expenditure. Here's a hard and fast rule: If it costs more than you normally spend for a month's worth of office supplies, then you should do some homework first.

But you're busy, you say. You have too much to do to also be running around researching every purchase; so delegate. Get someone you trust to look into it and to develop a simple business case report which explains the economic reasons for the purchase. Instruct them to keep it simple and reduce their conclusions to a single page. If you have questions, you can always ask them to justify their positions with additional research data. A business case is invaluable when you are considering any large expense.

If you don't have anyone on staff that is capable of producing a business case, then look to outside help. For example, if it's a computer related purchase then bring in a business technology expert to review the matter. In order to ensure that your outside expert will provide you with an accurate analysis, tell them from the beginning that they are only being hired to produce the business case, not for the purchase of the system. Too many consultants are really just salesmen in disguise who are more interested in selling you their systems. In the computer consulting industry there are numerous reseller opportunities for consultants to earn hefty commissions by convincing you to buy from a specific vendor. So, to make sure you get straight and honest answers, tell them you aren't going to buy from them. A real consultant (as opposed to a disguised salesman) will accept the terms and will happily prepare the analysis for you.

As a business owner you have to be smart. Don't fall for marketing hype and brilliant sales pitches. Spend your money wisely. Learn to rely on business case reports that justify expenses that are greater than your normal purchasing rates. A business case will help you run your business better and will allow you to spend your money on the products or services your company genuinely needs. And that always helps you sleep better.

R-Squared Computing - Business Technology Experts