The Buyer in All of Us Part VII of VII. “(The Cash Rich (Fat, Dumb and Happy)”

January 13th, 2021

Procurement Leaders! What type of a buyer are you personally and professionally? What about your team?.

 

Today’s post is assembled by Ron Southard, CEO at SafeSourcing based on data from our white papers and past blogs at SafeSourcing Inc.

John is a very successful person. He does extremely well and, because of some great ideas he is sold, is making more money than he can spend. The more he spends, the more he seems to make. When he goes to a restaurant or to a store, he barely glances at the prices because he knows he has plenty of money in the bank. If he wants something or wants to take a trip, he just spends the money and does it. If John saves money throughout this, he barely notices it because he gets the things he needs and wants whenever he feels like it. He thinks that he is well-insulated to the emergencies that may come and believes he will always have enough.

No Time to Save – There may not be too many businesses in the position that John is in, but there are some. These companies are ones that are and have done very well, growing faster than they can sometimes handle and increasing their revenue year after year. Their resources are completely focused on the growth of their fortunate business, so they have little time to invest in doing the things to save money now. In their minds, it is tough to justify spending time on a process to save a million dollars when they could invest that same time to grow their profits by ten million. They know there may be a time when they must save and cut costs, but that time is not today. This can lead to issues down the road if they do not have the infrastructure in place to transition to a new way of business.

The Crash “Down the road” – There always seems to be an end to the growth “down the road” followed by a time that requires expense reduction. If cost-controlling processes, tools, and partnerships are not established when the company is growing it is difficult to turn those on when expenses must be cut. In many of these cases this involves cutting blindly from the #1 expense: headcount. As we saw during the turmoil of the auto industry, staff was greatly reduced, plants were closed, and jobs lost to combat lost revenue. Having processes in place that are operating, even at a minimal effort, provides a system that can be ramped up to help later if needed.

Trickle Down Effect – As many people in John’s life will attest, when the controller of the money is unconcerned about how that money is spent, those around him tend not to either. John’s wife, children, employees, and friends have the tendency to spend John’s money just as easily as he does. In the business world, this translates to employees who travel without trying to get the deals, paying extra money to fly on a certain airline, or staying in a specific hotel because they want the miles or points. It can also mean that managers and executives may spend too much money enjoying the benefits of strong growth without the consideration that the growth and extra cash may someday go away.

Growth is a great thing as is rewarding those people who got it that way. The best approach to dealing with growth and increased revenue, however, is to put the programs in place to prepare for a time in the future when it goes away. By putting savings processes and policies in place when things are good, even if you do not put a huge time investment into it, you can be prepared for leaner times.

Please check back tomorrow for a post Part VII Wrap Up entitled Regardless! In order to learn more about SafeSourcing, please contact a SafeSourcing Customer Services Associate and ask about our risk free trial program.

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