One of the major undoings of many people (especially business owners and entrepreneurs) is their inability to separate their wants from their needs. Economics has formed a very crucial part of our lives and it can be applied in our day-to-day activities. Here, we will focus on Scale of Preferences as a tool in economics. Scale of preference, in simple terms, is a list of someone's needs and wants in the order of priority. The keyword here is "priority".
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In business, it is important for entrepreneurs to identify what they need and in the priority they need them. This will help them to draft out their business plan and prepare well for it. You will agree with me that a business owner that has failed to planned his business well has automatically willingly submitted to a failed business. Planning in business is a factor that can never be overemphasized.
In planning, you should be able to draw out a roadmap, a financial contingency plan and a list of you "want and needs". A friend once narrated the avoidable bad experience he had at the initial stage of his business and I feel it is worth sharing. He was used to "impulse buying" and it became a flaw to him. The major problem was that the things he was normally moved to buy were things that will pass as "wants" and not "needs".
Well, an old adage says that "experience teaches the better lesson". A point came in his business when financial turbulence came and to save his business, he had to sell some of the things he needed. You see, he spent money on buying what he didn't need but when challenges came, he had to sell what he needed. That was how he learnt his lesson and began to draw out his scale of preference.
When he made a list of his "wants and needs" in their priority, he was surprised that he was majoring on the minor for long. The truth is, if you can't pinpoint your exact needs, then there is no way to sieve them from your wants. One way to know this is to ask yourself these questions before you spend: "what do I need this for?" "Is there any other alternative to this?" These questions are like pointers to separate needs from wants.
Image from Pixabay
The success of business lies in the decision of the person(s) that run the business. Believe me, a wrong financial decision that is taken may wreck the future of a business, so do not underestimate the power of having a scale of preference list; to guide your financial decisions and to help you to grow financially.
Thanks for reading