What Are You Buying Anyway?

For your entertainment and edification, we present a tragedy in Two Acts: The Fable of the Banjo

ACT ONE (Scene – the Corporate World)

VP: We really need one of those things that makes music. [thinking guitar]
CEO: Yes, let’s get one of those things with strings that makes music. [thinking violin]
Banjo Vendor: I will sell you the PERFECT thing!
VP: Where do I sign?
CEO: Huzzah!

 

ACT TWO (Six months later)

VP: This music sounds terrible… where’s my guitar?
CEO: That’s not what we wanted… why did you buy that?
Banjo   Vendor: Why did you buy a banjo if you don’t like the music? What’s wrong with you?
CEO: Alas…

 

It may not be Shakespeare, but there’s a moral. Every purchase should begin by asking: “What are we buying?”

As obvious as the question seems, the answer can be surprisingly complex and subtle. A small investment of time early on to thoroughly understand what you are buying will inform the process, lead to savings, and minimize potentially huge mistakes (like buying the Banjo). With just a few tweaks to your negotiation and buyer training, you can ensure that you gain exactly what you want every time, instead of ending up with your own version of a ‘banjo’. This article presents a quick process and tool to get you there.

First, consider the case of accounting services. When you pay your accountant, what are you buying? Here are a few possibilities:

  1. HELP on tedious organizational and administrative bookkeeping-related tasks
  2. EXPERTISE in a complex area where you don’t know everything you need to know
  3. SAFETY (or reduced risk) by having a qualified third party involved in a critical part of your business
  4. INFORMATION on new regulations, tax rates, exemptions, etc.

The accounting function is mature and well-defined for most American business, so you probably don’t have to give too much thought to your approach. But consider a few other scenarios:

  1. When you spend on marketing, do you want expertise (creative help, strategic input) or simply execution of the campaign (placement and communication)? Both are valid answers, but can have HUGE implications on whom you select and what you pay.
  2. Is a software purchase primarily a tool, or a methodology? Many software solutions today have embedded best practices and accompanying training. Will you re-train your people and re-work your processes, or do you simply want a tool to fit into how you are doing things currently?
  3. When you buy physical goods, is it simply delivery of something you need? Or are you buying flexibility and reducing risk because of the timing of purchases and payments? The answer would dramatically impact your contract and terms.

Most organizations have sad tales of purchases gone wrong, and in many cases the problem started at conception: a misunderstanding of what they were buying. (“I never wanted a banjo!”)

Here’s a three-step process to make sure that doesn’t happen on your watch, and a simple spreadsheet tool below to assist you with your own personal buyer training:

What-Are-We_Buying

The process:

  1. Discuss what you are buying with your team
  2. Document what you are buying and circulate internally until you have agreement or the right level of approval (you may not always get agreement)
  3. Share what you are buying with the vendors early in the process IN WRITING (to get best pricing, right vendor, right engagement)

The first step – a team discussion of what you are buying with the key stakeholders – may be revealing, and possibly contentious and political. You might hear sentences like this:

  1. “We don’t need their strategic input on our marketing plan, we just need them to blast the emails.”
  2. “We’re going to keep the old system for the daily operations and just plug the new one in for certain functions.”
  3. “Of course we’ll still keep the full team in place managing this function; they’ll have to watch over the vendor.”

As sensitive (and painful) as these discussions may be, you want have them as early in the process as possible. If you don’t have unity in what you think you are buying, you are set up for waste, disappointment and a frustrated vendor relationship. (For a picture of this related to business process outsourcing, send me a note and ask for “The Promise and Peril of BPO.”)

When you’ve documented your results and agreed upon them, you can move forward with the buying process. You will have a working draft of your evaluation criteria (in the percentages), and you may even consider different solutions, different negotiation tactics, or even different vendors based on what you learned.

Example: If Safety (that is, reducing risk) isn’t a reason, then you may not care about the provider’s certifications or brand or history, etc… however if safety is 30% of the reason, then you might need to go with a leading provider with all the credentials.

Finally, share your results with the vendor. It shows that you have your act together, and will help them qualify you as a customer.  Plus you’ll have some documentation for when those bumps arise.

Do any of these scenarios sound like fun?

  1. Firing a vendor after two years of disappointment and cost
  2. Force-fitting the wrong solution, because it’s too costly to switch
  3. Coming across a solution and saying, “THAT’s what we really wanted five years ago!”

Don’t buy the banjo. Take the time to ask and answer, “What are we buying anyway?”

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