Costs of Doing Business
By Mike Zawitkowski. Filed in Business |Tags: Business, business models, costs, economics, expenses, finance, stick figures, time
Party A wants what Party B has. They agree to trade something they have for what the other wants.
In this earlier post, I retold the story of an exchange that took place in my childhood literature: exchanging smells for sounds. This is part of a series of posts that build up to some very common questions I continue to receive from people looking for success in the music industry.
Above you’ll see a very very simple illustration. There are two people. Let’s call Party A by the name “Andy” and Party B by the name “Bill.” They just finished a transaction of commerce. Here’s the exciting details of how it went down:
- Andy has something that Bill perceived as valuable. Bill wants what Andy has.
- Inversely, Bill has something that Andy not only sees as valuable to him, but he wants it for himself.
- Andy and Bill agree to a trade. Andy will give his valuable item to Bill, and Bill will give his valuable item to Andy.
Somehow, Andy found out that Bill has some item. Furthermore, Andy wants it in his possession. Andy wants it bad enough that he will give up things so that he can be the owner of that same item that Bill wants:
- Andy will definitely give up time to think about how to get his hand’s on Bill’s toy.
- Andy will cancel his dinner date so he can focus on acquiring this item. (Remember Opportunity Cost?)
- Andy may trade something he owns to get one for himself.
- Andy might give up more to prevent Bill from having what Andy has not.
- Andy might even risk jail time for the thrill of stealing one of these valued items.
The list goes on, but you get the point, right? If Andy wants this magical item that Bill has, he should be prepared to give up multiple tangible and intangible assets in his quest to acquire it from Bill or from someone else.
The same goes for any business relationship, or deal, or even purchasing a piece of music. The same type of costs apply even when you’re trying to decide whether to drive to the store to buy a new CD, or download it from an online store, or acquire it in a legally-questionable manner like from a file sharing service.
Food for Thought:
What is an upcoming business transaction that will take place between you and another party (Even if it’s just ordering pizza)? How many tangible and intangible costs can you identify that you may need to cough up in order to close the deal?