The Wisdom of the Mexican Silversmith

Greetings from Mexico! This post is perfect for our first Friday in the Baja.

When I was in the jewelry business, one of our favorite vendors, Robert, carried beautiful sterling silver jewelry from?Taxco, the silver-mining capital of Mexico. It's also the home of Mexico's finest jewelry craftsman. Robert shared with us the frustration he experienced buying from a silversmith in Taxco.

He?told us the story of working with a silversmith to create a sterling silver cross design he wanted to introduce to his collection. By the third modification, it was perfect.?

Robert shared with us his negotiating strategy to get the best possible price: it?was to ask what the cost was for three. After some back-and-forth negotiation, they agreed on a price of six dollars each.

Robert then asked for a price for a dozen expecting it to be much lower.

The silversmith said he would need two days to work out the price, and they agreed to meet again to complete the deal. Two days later, the silversmith returned and said, "The?cost would be eight dollars per cross for a dozen, and my price is firm."

"I was stunned."?Robert said.?"How is it possible that the price is higher if I buy more from you?"

The silversmith replied that to make twelve, he needed to buy more silver, and he needed to hire two of his cousins, and?he?would need to supervise them.?

"My costs will be higher, so my price must be higher."?When Robert shared the story, he shook his head and said that these craftsmen need to be?savvier?businesspeople.

Today, I know the silversmith was both savvy and a wise man. Scaling does not guarantee a reduction in costs. More often than not, expenses go up, and the profit margins go down.

More businesses go under because they underestimate the cost of growth for various reasons.?High growth is high risk, and unexpected expenses and hurdles are inevitable?

My formula for growth is whatever you think the cost will be, double it and add twenty percent.?

The same rule applies if you are remodeling a kitchen or bathroom or planning a vacation, especially a wedding. (Or as we just learned?-?a move)?Expect the unexpected and make sure you have a capital reserve.

If you are starting a business or launching a new division or profit center, please download our?Opportunity Assessment Tool. We took great care to develop this to help business owners ask the right questions, gain clarity, and minimize the risks inherent in launching any new opportunity.?Our Opportunity Assessment Tool?will enable you to create new ventures or opportunities with your eyes wide open.?

I wish for the wisdom of the Mexican silversmith.?Más volumen no garantiza más ganancias.

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