Why to buy (or not) luxury for your company ?

The first aim of a company is to create value for stakeholders.  Otherwise, you should be categorized as a non-profit organization or maybe a public company.

So, every expenditure done by your company should be well balanced between cost/efficiency.

But around us, we can see companies who own luxury cars, prestigious offices and famous designed furniture.

We can split those expenditures in three categories: Salaries, Dividend and Marketing.

Mercedes SLS

Luxury car

Salaries: honey catches more flies than vinegar.  If you want quality people, you have to spend money.  For taxes reasons and social position, part of the salaries could be also luxury goods: expensive German car, business class flights, 5-star hotels…

Dividend: Many managers of SMB are also stakeholders.  For taxes reasons, it could be cheaper to ‘receive’ luxury goods than higher salaries or dividends.  It’s one of the reasons when you visit your lawyer; you see expensive decoration, trendy lamps and pieces of art.  Lawyers work frequently as associates.  So, salaries of managers and dividends mostly coincide.  Prestige is also important for them and this luxury can justify why you pay them a so high hourly rate.

Marketing: This is the most used justification for luxury.  When CFO has to justify expensive cars to the tax collector; it’s always to raise the trust of the suppliers; contemporary decoration to please the clients; business class tickets to meet potential business partners.  Even, if it is not untrue, this reason is mostly secondary.  Suppliers can trust you if you pay their invoice on time and your balance sheet is sexy; a creative show-room and Ikea furniture are probably enough to keep your clients happy and 3-star hotel is certainly enough to rest one or two nights.

So, before to start luxury expenses, think first about your stakeholders (even if it’s your mother or your wife) and make the good choices.

Nevertheless, I found a company who spent bunch of money in the craziest offices I ever seen.  They had extensive press coverage for this.  And now, they pretend it was more an investment in PR than in offices.  Judge by yourself:

Pionen Office - Sweden

Click the picture to see much more of this crazy offices