Tuesday, June 11, 2013

WHAT CAN WE LEARN FROM A VACATION?

Recently my wife and I took a short road trip to Eastern Washington as a little get-away from our routine.  One of our stops was the Whitman Mission near Walla Walla, Washington.  The Whitmans were one of the first missionary couples to come to the Oregon Territory, about 1837.  They were very committed to reaching the local natives with the gospel of Jesus Christ and truly had hearts to serve these people.  However, typical of missionaries of that time period, they did not try to understand the native culture or learn the native language, but tried to teach them about Jesus in the English language and teach them the white culture.  After many serious misunderstandings, the natives rebelled against the mission and killed the white adults at the mission.
 
The lesson that we can try to apply to the business and investment setting is to try to see the other party’s point of view and negotiate knowing their position.  When I first started in public accounting after college I was enthusiastic to show my clients how to do their bookkeeping or accounting “properly”.  When clients would bring in their records at the end of the year, I would patiently show them how to do good accounting to make their records “better”.  What I discovered the following year was that their records were now an attempt to follow my rules, which they did not really understand.  The result was a record system that now neither they nor I could understand.  After one or two years I realized part of my training as an accountant was to help me figure out other accounting systems. Rather than try to teach my clients accounting, I needed to learn to understand their systems.

So how does this apply to how we do business?  When we are doing business deals we should try to see the other person’s problems so that we can better negotiate our deals.  Let’s say, for example, you have a store that sells many products, including widgets.  You sell about 200 widgets per month and need to order some from your supplier.  Widgets cost you about $20 each to buy so you only want to buy one month’s supply at a time.  Your supplier says that if you only buy 200 units he will have to charge you $30 each.  If you want to pay $20 each you will have to buy 1000 units.  What do you do?  Looking at your supplier’s problem you realize that he has a minimum set-up cost in time and materials every time he sets up to make a production run.  This helps you to come up with arguments to help you negotiate.  You can promise to buy 1000 units in the next five months if he will sell them to you for $20, giving him the option of doing the full run of 1000 and holding the inventory himself.  Or you might tell him you have been a steady customer for several years and plan to continue to be a customer, showing him that you understand his problem and here is why he should give you the lower price.  The point is, you see he has a problem and try to find a way that you both can be happy.

Whether buying a house, making an investment, or making a business decision, try to see what the other person’s problems are and see if you can make a proposal that solves some of his concerns.  Many times you can accomplish this just with the words or attitude with which you negotiate, showing that you understand the problems, giving up no real cost to yourself.  Looking at an issue from the opposing point of view can almost always help you to do better deals.

Loren L McCann, CPA, MS (Tax)

Wednesday, June 5, 2013

TO TELL THE TRUTH

There used to be a television program by the name “To Tell the Truth” in which the contestant had to try to tell which panel member was telling the truth.  I only watched the program a time or two and that was decades ago, so I do not remember much about it except that some of the panel members would tell lies about themselves and one would tell the truth.  The contestant had to try to guess which was telling the truth.  I would like to take the position that in business and finance (as well as our personal lives) we should always tell the truth.  I realize that in taking this position I am suggesting we go against common practice.  Many would tell you that it is silly to tell the truth when many of those around us are lying, but I believe we encounter fewer problems in the long run when we commit to always telling the truth.

                There are some, I won’t name names, who think that a “white lie” is OK.  I do not agree.  I believe any untruth either makes future dealings worse or, at best, just puts off a difficult situation until a later date.  I think we are better off to suck it up now and tell the truth to begin with.  The people we do business with will respect that we are willing to tell the truth even when it is difficult, and our future dealings with those people will not be complicated by trying to work around a previous untruth.  Everyone makes mistakes or foolish choices that we would rather not have to own up to, but when it involves someone we are doing a business deal with, get it out into the open and deal with it.  Then we can move forward with a clean slate.  I know I would much rather deal with someone who is willing to admit that they made a mistake than to do business with someone I suspect made a mistake but is unwilling to admit it.

                Some might say that this advice is outside of giving business advice and that makes me sad.  How we do business is an important part of business advice.  How would it be if most of the people we did business with were completely honest with us?  Wouldn’t our business lives be both more financially rewarding and more enjoyable?  Part of simplifying our lives could be to tell the truth in all things, even in our businesses.
 
Loren L McCann, CPA, MS (Tax)