If you’re on a time crunch, the answer is a fast nickel. But why?
Everyone knows that the life force to good financial health in your business is cash flow (or, you should know that anyway). When you’re first getting started, especially if you’re on a shoe-string budget, chances are you don’t have a huge operating budget to work with, and you probably don’t have a ton of cash in the bank either. So, you need to turn over product as soon as possible in order to keep the capital coming in.
The biggest mistake I see new guys make is that they hold out for the absolute highest price possible on an item, and it costs them dearly.
The easiest way to explain it is through example, so here we go.
Let’s just say that I buy a 1995 Toyota Corolla for $1200 bucks.. The car is in good condition, and other cars on the market are listed at $1900-$2400. Note that I said “listed at”. Here’s where it gets tough psychologically for a lot of people in the resale game. Most of us want to get that whole $2400 and double our money, and I mean, who wouldn’t.. that seems logical. But our mind isn’t wired to naturally include the variable of time, and opportunity.
So, I get this Corolla for $1200, and I clean it up, price it at $2400 and post some ads, even list it on eBay with a reserve of $2400 maybe. It doesn’t sell, and it doesn’t sell, and it doesn’t sell. So I get a little frustrated, drop the price to $2200 and try again. And I wait. I might get a couple bites on it, but no one that’s too serious at that price. It’s been a hypothetical month now and I finally find some sucker to take me up on it for $2200 and I’ve cleared a cool $1000 in profit, right? Not too shabby… That’s the slow dime example.
Now, let’s take a look at the quick nickel.
I buy the same Corolla for $1200, but realizing that the other cars are priced from $1900 to $2400, I list mine for a quick sale at $1800. I get a bunch of emails, likely from people that are going to try and lowball me, but also from some people that have $1800 to spend and are serious about buying a car. Within a week, I find a buyer that wants the car, and negotiates me down to $1700 and I take the deal. I just made $500 in a week.
Now, let’s just say I jump on craigslist and happen to find a nice.. uh.. 2002 Ford Ranger. Base model. Guy needs cash pretty bad and the car is a steal listed at $2000.. I immediately jump in my car and go look at it, $1700 in hand, and by some crazy miracle talk this guy into taking $1700 smack-a-roonies in cash for the truck. What do I do then? Turn it on craigslist for another quick $500 profit within a week or so.
So, you’re thinking, “ok.. so you’ve made $1000 in each scenario”. And you’d be right, except you haven’t considered that there are still 2 weeks left in my timeline with the fast nickel for me to turn that money into more money.
So, let me ask you this:
Would you rather make $1000 a month, or $500 a week?
And that’s the difference between a fast nickel and a slow dime.
Most sales type books will tell you to hold out for your best price. I disagree. Fast nickel wins it for me every time.
Comment Question of the Day
Have you ever been caught up in the “slow dime” mentality, and in the end was it worth it?