The First Rule Revisited

It has been pointed out to me lately that the First Rule of Business (see my post for June 1, 2007) is rather more complicated than I may have made it sound. To review, I have often stated that the first rule of Business can be summed up in the humorous phrase, “When someone comes to you and says ‘Hello, I would like to give you a lot of money now,’ you say, YES!” However, it is only fair to admit that this isn’t always possible.

Take the obvious case of a business that is not open when you go to purchase something from them. This may, at first, seem like a clear First Rule violation, but is it really? Suppose that the business is a restaurant, and that between labor, electricity, heating and cooling, and whatnot, it costs $300 per hour to keep the doors open. If you are the only customer who shows up during that hour, and your meal will only net the establishment $25 (once the material costs are taken out), then keeping the place open in order to get your business will cost the owner $275. It’s possible, of course, that you were scouting the place for a business dinner, are now affronted enough to take your banquet elsewhere, and will therefore end up costing the restaurant more money than they saved by not being open for that hour, but this is hardly likely.

On the other hand, if you were one of a dozen people who arrived during that hour when the business was closed, the decision to be closed at that time was probably not a good one; the restaurant would have broken even for that hour and the chance of losing future business from one of the customers has just increased by a factor of 12. Even worse, there is a real possibility that additional people who were passing by might have noticed the 12 hungry diners enjoying their meal and come in as well, at least assuming the establishment has walk-in traffic in the first place. And if you were one of 20 or 30 people turned away, then the decision to be closed is simply idiocy.

Then there’s the case of someone wanting to give you money to do something you are not able to do. Asking a restaurant to cater an event at your home may seem reasonable enough, but if the business lacks the equipment, transportation, and personnel to handle such a commission, they may not be able to comply. Moreover, if there are a large number of catering businesses in the area and this particular restaurant lacks the resources (space, equipment, personnel, or most of all, financial) to expand into catering, it may be a very poor business decision for them to attempt to accommodate you. A good manager may offer to pack food for you to take out, or offer to work with an event planning company (who can handle your non-food event needs) in order to make a go of the event, but they can not in reason be expected to re-engineer their entire company simply to accommodate one customer, even if you are a very good customer.

Of course, many business analysts will tell you that you should never tell a customer “no” when they are offering you money to do something (provided the something is legal and ethical, anyway). The theory goes that you should, instead, tell the customer “Sure, we can do that. But it will cost you…” In fact, entire corporations have been launched simply because one wealthy customer was willing to pay an outrageous fee in order to have a business created for their specific use. Even if your customer does not want to fund the start-up of your new business unit, at least this way you are not rejecting them; you are merely telling them that what they want is too expensive to be practical. You are then working from the excellent position of trying to find a way to do business that will suit both their needs and your abilities.

Then we have the case of “customers” who want your business to accommodate them even when doing so will destroy your company. In much the same sense that people who want you to destroy yourself for their amusement are not your friends, people who want you to immolate the company to suit them are not your customers. Or, at least, they shouldn’t be…