Needs Versus Wants

How often do the words "I need" come out of your mouth, as it relates to your business? When you run your own company, it's easy to think that the only way to succeed is to be moving forward with your expenses -- the newest technology, a broader circle of professionals providing you services, involvement in more and more costly marketing efforts, etc. And it's particularly difficult to resist the urge when you know you can generally take a tax DEDUCTION for any business expenses. But did you ever stop to think how many of those requests are actually needs, and how many are simply wants?

WHAT IS A NEED?

Let's start by defining "need." In the strictest sense of the word, a "need" is something that you have to have to get by in this world -- a NECESSITY. In your personal life, you need food, shelter, clothing, medical care -- the basics. You will probably experience physical suffering of some sort if you don't have your needs met. In your business, you also have some basic needs -- business cards, basic office equipment and supplies, a scheduling and follow up system, involvement in some networking activities, and generally some professional development or continuing education for your field. You can't run your company successfully without them. Depending on your area of specialization and experience, some assistance with accounting, legal, or other professional issues might also be considered a "need."

A want, on the other hand, is something that you desire -- something you would like to have. But by no means will you suffer in any way (except perhaps mental anguish!) if you don't get the thing you want. "Wants" quite often fall into the category of LUXURIES -- nice to have, but the world won't end without them. Having a computer that could keep Mir running or an Amazon.com quality website certainly fall into this category. But other items could be considered wants, depending on the type of business your run, your customer base, and the level of product or service you provide.

MAKING THE DISTINCTION

The hard part comes when you live in a prosperous capitalistic society, like ours. The "western" standard of living is so high that even many of our poor tend to live above the level of basic needs. In 1998, 97% of "poor" Americans (as defined by the Census Bureau) owned a television -- something that could definitely be considered a luxury. In many third-world countries, less than 30% of the population even has access to electricity -- which most westerners would consider an absolute necessity. My intention is not to make anyone feel guilty -- it's simply to point out that the distinction between want and need is often RELATIVE. It depends on the area in which you live, the company you keep, the lifestyle you choose, and the expectations of the society around you.

It is also important to have some PERSPECTIVE about your place in the world marketplace. If you are running a small business, the goal is not to become a multi-millionaire in the first year -- sinking every penny you can get your hands on in your company, without an eye to the future (look at all of the dot-bombs in the early 90's). You have to start out slowly -- growing responsibly and spacing out your business investments as your revenues increase. At one point in your company's lifetime, having a staff person to handle administrative duties may definitely be a luxury -- but farther down the road, it might well become a necessity for you to handle the influx of new customers. On the flip side, you might make some changes in your business structure that allow you to let go of staff, reduce your need for expensive technology, or decrease some other expense. This is why it is so important to constantly RE-EVALUATE your needs and expenditures -- to make sure they are still in alignment with each other.

THE POWER OF ADVERTISING

We are influenced, every day, by the popular culture around us. Television, magazines, movies, and advertising have all done a splendid job of PROGRAMMING us to think that we need a lot of excess consumable goods. Pretend that you are watching TV or flipping through your favorite business magazine and see an ad for something fabulous -- the latest PalmXXII, Turbo, complete with satellite com link, scanner, global positioning system, and built in web server. Suddenly, your heart speeds up, and you get a tingly feeling in your gut. It's perfect -- how had you ever lived without it before? You rush right to the store -- what?! You don't have any left in stock?! Your heart sinks and you feel a rush of disappointment. You spend the rest of the day moping because you couldn't find it anywhere.

Now, this might be a bit of an exaggeration, but it's not far off the mark for some people. How often have you learned of a new product and were certain that you absolutely had to HAVE it? What if you had never seen the ad? Would your life be any worse off? It's as if the knowledge that something exists causes the need for it.

KEEPING UP WITH THE JONESES

And, of course, we have peer pressure! But with the advent of the "global society," the Joneses are not just the people next door anymore. They include business tycoons and techo-gurus and imaginary people on TV that don't even really exist. But we hold these folks up as the STANDARD against which we should measure our own lives. Just because Bill Gates has an office that will run itself entirely through voice recognition, we think that our manual way of doing things is dated. And since that 24 year-old dot-com wiz profiled in Fast Company reads 23 business journals a week, we think we need to start subscribing too.

THE HIGH COST OF NEEDS

So why is any of this a problem? Let me ask you a confidential question -- how much DEBT is your business carrying? Do you have several thousand (or tens of thousands!) dollars of past credit card purchases that you are still trying to pay off? Are you paying every spare penny you earn through your company each month to pay for your “corporate” lifestyle? How does your financial future look? Are you able to save for a rainy day -- to put aside a reserve in case the economy tanks?

When your spending PRIORITIES are out of whack, you tend to experience stress, guilt, and anxiety -- it can even affect your health. And just think about how many personal relationships are strained (even broken) over money issues. This can be a particularly sensitive issue for entrepreneurs, as the line between business and personal finances is often so blurred. Is that really how you want to live your life?

BALANCING NEEDS AND WANTS

Certainly, no one is suggesting that you give away everything you own and become a monk! But it is important that you strike a balance between those things that you have to have and the things that you would like to have. And it's important that you be able to PRIORITIZE your business spending. The goal is to focus on those things that will really improve your efficiency, effectiveness, and bottom line -- rather than just look flashy.

SO WHAT DO I DO NEXT?

Start by making a LIST of all your wants and needs. Try to be brutally honest about which category they fall into. Then, take a look at the items in your want list. First, ask yourself how much each purchase will IMPROVE your quality of life as a business person -- how it will boost your company’s bottom line or build a base for future growth. Rate them with an "A" for a large improvement down to a "C" for a negligible improvement (and if it will actively detract from your entrepreneurial quality of life, cross it off the list!) At this point, don't even worry about the "B's" and "C's" -- if we get you to a point where you can have all of your "A" wants, then you can think about the rest.

Now, take a look at your "A's" -- try to decide if there is some way you can BALANCE between your high-priority wants and your needs. What are you willing to give up? Where are you able to compromise? Perhaps you can forego the expensive computer and make do with the one you have to afford hiring a PR agent to help increase your exposure. Or buy your office furniture used to leave enough room in your budget for that additional certification program you’ve been wanting to take. If you make these decisions based on how the purchase will improve your life and your business -- based on your own personal priorities (instead of someone else's!)-- you shouldn't go wrong.