At some level, all of us are looking to get a favorable decision on ideas we put forth. Whether it’s being able to hire someone new, launch a new project, make a sale, or get approval for an acquisition. Too often, though, we overlook an important and time-saving point – does what we’re proposing “change the answer?” If it doesn’t, we’re wasting time and energy because nothing will ever come of all our hard work.
Let me explain with a couple of examples. I was lobbying for an acquisition. I built the financial models and my recommendation was to do the deal. Another individual in the approval chain was reviewing the economic model and started pushing on some of the costs in the pro forma future P&L. He believed they were too low (and therefore we were overstating the benefits of doing the deal).
He and I went back and forth for about an hour on whether a particular ratio was 10.2% (my estimate) or 10.5% (his estimate). On another item in the model we argued over whether it should be $37,500 or $42,000 (my and his estimates respectively). We spent a lot of time in the conversation (we were talking by phone). Eventually, I got tired of the argument. I put him on speakerphone, muted my end and let him babble for a while (he wasn’t listening to me anyway). After a while I got bored listening to the diatribe and started messing with the model. I looked at the cells we were arguing about and simply popped 50% and $80,000 into the model just to humor myself. That’s when the light bulb went off – even with those numbers in the model, the deal still made good economic sense. I took my end off mute and quickly said “okay, I’ll use your numbers.” He was surprised with how easily and suddenly I rolled over.
“Great but why the sudden change?”