Feregni rule of Acquisition #3

The Ferengi Rules of Acquisition usually have to be reversed in order to apply to most ethical business situations, but sometimes they are right on the mark. You should never pay more for something than you have to. This is why human beings like sales; it is in our psychological makeup to believe that we got the best possible deal for the least amount of expenditure. When it comes to our businesses however, we often don’t plan for the purchase, let alone shop around for it.  Normally the price is the only thing that you look at when purchasing a new piece of equipment or even software for your business. In reality the cheapest product will often cost us more. Running the numbers means comparing how much it will save you over what you are currently using or other similar products.

When comparing two similar machines, we often overlook how value will be affected in the years to come. Let’s say you have machine A and machine B, which both have the specifications you are looking for. A costs $1,000, and B costs $2,000, without looking at the value of each machine, machine A might seem like the better deal. However, you might change your mind when you realize that machine A requires $500 a year in maintenance costs, while machine B only costs $100 a year to maintain. What if machine B holds its value better and normally re-sells for $1000 at the end of five years; but machine A only has a re-sale value of $100 at the end of five years? Which machine is the better acquisition?

When it comes to expenses for your business, the initial cost is not always the only thing you should factor in to your decision. Ongoing costs should be looked at too. Perhaps machine A can crank out more products per hour and that might override your decision about buying machine B. Never spend more than you have to, to create the same level of profit. And to the good Ferengi, profit is everything!