In the BizBasics Online Finance 1 course, The Fundamental Philosophy of Spending Decisions is a study in simplicity.
This is a philosophy which is NOT in any books on finance but was developed by the Biz Buck Guy based on many years of experience. (It subsequently was reviewed by a top finance professor who buys into it.)
The Fundamental Philosophy is:
- Do a financial valuation. Let the numbers show you a tentative direction.
- Consider all intangibles.
- Weigh the intangible against the numbers and decide, based on common sense, which one outweighs the other (if they are in conflict).
This philosophy means do not allow intangible to be considered until the numbers are racked out, particularly in group decision making meetings.
The facilitator must keep the group focused on the numbers and not stray into intangibles until the numbers are done and show the tentative direction. Otherwise, the group will talk and bounce around, onto, and off of many related issues concerning the decision.
The Biz Bucks Guy calls this “churning”. It is just like the group is using any old butter churn to make a decision.
Someone puts in one ingredient and the handle begins to go up and down. Then other ingredients are added and the churning continues. After a lengthy time, some soft gooey mess starts looking hard enough to call it butter and the meeting is done, the decision is made and a worn out group leaves thinking they did a great work that day.
In fact, many times the group tires and looks to the one in the group with the must clout for a decision. This may just simply be the boss dominating the group and setting the final direction.
Churning can result in less sharp, more soft decisions which take longer to make.
Keep intangibles separate until the end for better, quicker decisions.
The Fundamental Philosophy of Spending Decisions is one of the beginning steps in our BBO Decision-Making Methodology©. It is discussed in our Finance 1 course where we also dive into the concept of “intangibles”.
The BBO Decision-Making Methodology© is comprised of concepts taught in all of our BBO courses. Skills and concepts from all four quantitative business subjects (Statistic, Accounting, Finance, & Economics – the S.A.F.E. subjects) are combined to create a straightforward and easy to use chart to help you make wise decisions. You can read more about those courses here.