When Cost-Effective Meets Cash-Flow
Dallas, TX – We can justify just about anything, can’t we? A good salesman knows that people make decisions with emotion (and salesmen are the worst!) and justify those decisions with reason or logic. It’s the emotional angle that drives our want and the logical argument for it fuels the need.
We’re a sorry lot, aren’t we?
But there have to be boundaries as when Clint Eastwood says, “a man’s gotta know his limits.” So, when someone tells you that a solution is cost-effective it may very well be cost-effective. All that means is that something that costs you a dollar will return more than it cost in a pre-determined timeframe. (Cost-effective doesn’t have anything to do with “price”, or “cheap”. That’s another post.)
Cost-effective doesn’t mean you can afford it. Your cash-flow or budget, personal or business, determines that. If a widget costs a dollar, and returns three dollars this month, you may determine it’s a cost-effective solution. If you don’t have a dollar in your budget, however, you simply can’t afford it right now no matter how cost-effective it is.
Cost-effective, meet cash-flow.
Suppose that same one dollar widget returns one million dollars this month! Now, can you afford it?
No.
You still don’t have a dollar in the budget no matter how much the widget returns. The degree of cost-effectiveness has no direct correlation to your current ability to purchase.
This is where so many of us go wrong. If I could convince you that the widget really would return one million dollars this month on a one dollar purchase, you’d likely become very excited and convince yourself that you’d be crazy not to buy it.
“We’ll be millionaires, etc.” You’re on an emotional high!
Then you’d look for logical reasons to support that “want”.
“We’ll be wealthy, we can get that new car for you, we’ll get that bigger house you wanted, the cat will like you now, we can fix the blah, blah, blah”. We’ll use anything that sounds logical to support our wants.
When “cost-effective” meets “cash-flow” the natural off-spring should be to, “live within your means”. Make decisions with your head, not your heart. Or my favorite, “let the data drive decisions.” Decisions based on numbers and logic will produce better results than emotional knee-jerk reactions any day of the week.
You’re on your own with the cat.
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Phillip Crum is the Chief Idea Officer of Sir Speedy Walnut Hill located at 2414 Arbuckle Court Dallas, TX 75229, and is committed to the idea of helping small business owners do a better job of finding their next customer or client. Phillip can be reached at 214-213-7445, or via email.
Copyright © 2006-2010 Phillip Crum
