Shopping 101

Two types of purchases exist in business: disposable purchases and investment purchases. Guerrillas recognize the difference between these two and decide which category a purchase falls into before they buy.

Disposable purchases are goods or services that you will use once. Staples and pens are disposable purchases. Purchases you will reap the rewards of or suffer the problems of again and again are investment purchases. A telephone is an investment purchase because you will use it every business day. A telephone answering service is also an investment purchase, because a poor service may cause you to lose callers week after week, while a good service will impress your customers.

Paper could fall into either category depending on how you plan to use it. Copier paper for internal use would be a disposable purchase, whereas letterhead stationery would be an investment purchase - an investment in your image.

Once you know whether a purchase is disposable or an investment, then you can use that information to decide where to save money. If a purchase is an investment, you may be willing to spend a little more money for added features or slightly better quality. It is also worthwhile to shop around more, spending more time calling different vendors or driving to several stores. In contrast, disposable purchases should be bought at the lowest possible price with the least amount of effort. Therefore, you may want to drive to three stores to save $150 on a fax machine, but you would not want to expend that much effort to save 50¢ on sticky notes.

This point may seem obvious, but many times consumers do not consciously contemplate whether an item is disposable or an investment before they buy. Instead, they rush, skimping on investment purchases and blindly spending too much on disposable ones.

Say, for example, you are considering Model X photocopier that costs $400 and Model Z copier that costs $475. All of the features are identical except that Model Z can make enlargements. You buy Model X because it is cheaper and think you have just saved yourself $75. But over the next two months, you make six visits to the local copy shop to make enlargements and spend $20 on each visit for a total of $120. According to this scenario, your decision to buy Model X cost you $45!

It is easy to see how equipment is an investment purchase, but do not overlook products or services that improve your image, such as a daily radio advertisement. Before you sign the check, you may also want to consider:

How will this purchase increase my profitability? Sonoma, California home-based photographic supply consultant Laurie Dry asks herself this question before she buys anything. If it does not contribute to the bottom line, she seriously considers keeping the money in her pocket. Alice Bredin, author of The Home Office Solution and The Virtual Office Survival Handbook, says, “Whenever you’re considering spending money, think about what would happen if you didn’t spend it. Then try not to spend it. That way you avoid overbuying. Software is a good example, because software is an incredibly powerful tool, but many people buy software and don’t use it.”

When do I need this? The most important thing to employ when shopping is foresight. Do not decide at 10 a.m. that you need a widget and buy it before noon. Think about it. The more expensive the item or the longer you will use it, the more you should think about it. Amy Dacyczyn, author of The Tightwad Gazette series, says you should buy something when not having it costs you money.

For instance, consider how much money you spend by not owning a fax machine. How much do you usually spend at the local copy shop sending or receiving faxes? If you spend $10 a month, it would take over twoyears to break even on the purchase of a fax. In the meantime, would that money be better spent somewhere else or earning interest in the bank? Moreover, will your faxing needs change in the foreseeable future? For example, you do not want to buy a fax machine to submit your work to a client and then next month, when you get Internet access, decide to email your work instead.

Which features do I need? Which ones can I live without? You may need to track your usage for a month or so to really determine this. Using the previous copier example, if you had tracked your copying habits for a month, you may have discovered how often you made enlargements, how much you spent, and the importance of having that feature.

Where can I get this? Notice we did not say, Where can I buy this? By thinking in terms of acquisition, not consumption, you become more creative in thinking of where to obtain the item for free or how you can modify something you already have to serve a new purpose. For example, Kathryn needed a way to organize business cards and telephone numbers without having to scroll through her computerized notes. Her first thought was, “I need a Rolodex.” But, upon reflection, she realized the true need: organized telephone numbers. Instead, she found an old recipe box and some index cards. She writes the person’s name or staples the business card to an index card, and then files it alphabetically. A free solution!

How much am I willing to pay for this? If you decide you need to buy something, it helps to have a ballpark figure in mind before you hit the garage sales or the stores and become swayed by bells and whistles. If you do not have any idea how much an item costs, you might need to do a little research. Study sales flyers and newspaper ads. Call for mail-order catalogs. Ask around at association meetings.

“Learn to use your imagination more and your pocketbook less. The people who aren’t in business a long time throw money at their problems. Those who are, are good problem solvers. Find imaginative ways to produce the goals you want. Figure out how to get the most mileage out of every dollar you spend.”
- Barbara Winter,
author of Making a Living Without a Job