Buy the Boots

The Sort of Math to Drive Your Bookkeeper Insane

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Phil Johnson Phil Johnson
The general manager for our San Francisco office sent me a long e-mail about his search for new office space. It seems that he had found an absolutely wonderful deal with everything we could possibly want. The one hitch was that it was more space than we needed and would cost $75,000 more a year than we wanted to spend. Should we take the deal, or should we pass? It reminded me that even the simplest decisions can be hard to make. I might have had too much time on my hands, but below is the e-mail I sent back to Frank.

Hi Frank,

It's actually an interesting business dilemma and raises some good questions about how to make decisions that don't have an obvious right or wrong answer. Let me tell you one of my favorite business stories. Years ago I was walking down the street in Boston and bumped into my friend Eliza, who is a bit of a ditz, in front of Ann Taylor's. She looked a little perplexed, and I asked what was going on. It seems that there were a pair of $200 boots in the window that Eliza wanted. So, I asked her if she had the money, and she said yes, she had exactly $200. What's the problem, then? I asked. Well, Eliza told me that she also owed her rent, which was $500. It's obvious, I said, you can't afford the rent; buy the boots. Eliza profusely thanked me and practically ran into Ann Taylor's. All turned out well, and today Eliza is an emergency-room physician in Texas. (Don't ever get sick in Austin.)

Sometimes, against all reasonable logic, you've just got to buy the boots. Business demands that you occasionally make decisions and take risks that appear impractical. It explains why very few bookkeepers actually run companies.

Here are a couple of other factors that would influence my decision:

The location and quality of the space sounds like a tremendous asset that could support recruitment and new business. It's also a huge plus that we don't need to spend money on renovations.

I would also weigh the costs of not taking the deal. What are the odds that we would find another space that we like so much in this neighborhood for $35 per square foot? We could pass on this deal and end up in a less desirable space, still paying more than we want.

There may be some ways we can mitigate that additional $75,000. Can we find a subtenant for the first year who will take a piece of the office? Can we negotiate the price? Every dollar off the price saves us $5,000 a year. If they gave us one-month free rent, we would save $12,000.

From a practical point of view, I would keep the deal moving so that we don't lose it. Maybe take 24 hours to evaluate whether your initial enthusiasm is justified. You might start seeing some problems that you didn't consider at first.

That's my advice, although I don't know the answer any more than you. My accountant used to tell me that there was one answer to all business problems: Make more money. That might apply to this one.

If you choose to take the gamble, I'm all in. Buy the boots!

Talk soon,
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