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Quantifying a Business Want vs a Business Need

Posted by : Premraj | Posted on : Wednesday, June 27, 2018

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What do you need? What does your business need? Can you put a number to your needs? Or can you set a value to your wants? It can be hard to tell the difference between needs and wants, and even harder to tell which is which for your business.

When you make any business decision, you need to decide if is is a necessity, or just something you desire for your business, a want. And you should be able to put a number to each of these. If you can’t, you don’t have any objective measure to decide your priorities or to budget your purchases or investments. To break this down start by considering needs.

Maslow’s Hierarchy of Needs

You may be familiar with Maslow’s Hierarchy, lots of people are and they do teach it in many schools. If not, the quick summary is you have a pyramid of needs with the most basic at the bottom and moving up to others as you climb toward the peak. The bottom layers cover things like food and shelter, essential physical needs.

If you don’t have these, you may be in physical distress. Higher up the pyramid, near the peak, are emotional needs for things like self-actualization. It may be difficult to distinguish needs far up the pyramid from wants. Your business might need to have a well-known brand in order to drive sufficient sales. Or it you might want to become a well-known brand in order to be even more profitable.

Quantifying 

This is where measurements come in. Using numbers to determine if you are meeting business goals or falling behind takes this from the realm of opinion into verifiable facts. One concern would be if you are measuring the wrong things, or your goals are being compared against the wrong values.

If your profitability is based on your sales, measuring the number of new customers brought in each month is not necessarily going to provide you the goal you need. Once you’ve picked the right things to measure, and are measuring them accurately, you can use those numbers to help determine if you are meeting needs or just pursuing wants.

Expenses

Recognizing the difference between spending on needed expenses and spending on wants can be difficult. Taking important clients out to an expensive dinner can feel like a need to keep your customer base happy, but make sure to return to your quantification. Does that expense reduce the profit enough where you are no longer making money on that client?

It might not make them unprofitable, but just take your best client down enough where those that require less expenses are more profitable. Depending on your business plan, these kind of expenses can still be a need. If you are trying to capture more market share, to attract bigger clients and grow significantly, entertaining big customers may be necessary. If you only plan on modest sustained growth, you may want to splurge on expensive dinners, but this is not a need.

Equipment

 If your business is dependent on equipment, you need to decide if the equipment you are purchasing is meeting your needs or simply something you want. Most companies do not need high-powered computer workstations, while software development, video processing, or other technical companies need powerful systems. A bookkeeper might want an expensive computer, but a video editor needs one.

This applies to many other fields. Consider food sales. If you run a restaurant you have a need for preparation equipment, kitchen equipment, and tables and plates. But as much as you want to purchase a truck to pick up supplies, it is not a necessity. Most bulk supplies can be delivered.

On the other hand, if you want to start a food truck business, you need to buy a food truck or food trailers to base your business out of.  Running a gourmet menu with tons of variety may be the dream, but food costs (and the equipment to cook those extra items) may be unneeded expenses in the infancy of your business.

Conclusion

Every aspect of your business can be assessed in this manner, separating your proposed spending between needs and wants and concentrating your resources on meeting your needs while deferring your wants for a later time. This doesn’t mean you will never be able to spend anything on your wants, but it prioritizes your budgeting to put your money where it will do you the most good.

Without meeting your needs your business may not survive. That’s the definition from Maslow, survival equates to your needs. This makes identifying needs and wants accurately and keeping the discipline to spend on needs first and only satisfy wants as your budget allows a critical skill for success. So while you can’t always get what you want, if you try sometimes, you can get what you need.

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