Part 2: Myths that will hurt your business

real price, hidden costs, inefficiencies, lost profit, expensive
Watch out for the hidden costs!

“I can’t afford that expense!”

How often have you heard that from your clients or even said that yourself!

As a business owner, I’m most likely to say this when I receive a quote that’s higher than I anticipated, though the thought did pop into my head when a business coach gave me some advice about employing someone with a skillset I don’t have.

Usually, this statement is the result of focussing solely on the money that will be exchanged for the product or service… but is that where the consideration should start and stop?

Is focussing just on the price a bit narrow minded?

Let’s dig deeper into the can’t-afford-it mentality.

What is the actual cost?

When it comes to business (and most things in life), the actual cost of an item or service is not just the price you pay – it’s the VALUE you receive by not doing it yourself (or not doing it at all).

This value can come in many forms:

  • Minimising delay to your customers
  • Capturing more leads/potential customers
  • Systems or applications that seamlessly integrate with one another
  • Happier staff
  • Being ahead of your competition
  • Faster response times when assisting clients
  • Less stress and mental health issues

The real value in a transaction is more likely in the things that are NOT easily seen. In fact, if you read through that list again, all of those items save or make you A LOT more money than you’d spend on the product or service.

This one time… (a real example)

Recently, I was speaking with a business owner who is also a client of mine.  Let’s call him Tom (not his real name).  Tom’s business is doing well and he has expanded into a number of other states.  When I first started working with Tom, he had 10 employees and 1 office.  He now has 70 employees across 4 offices.

He has a core business application which is a legacy system, meaning he acquired it when he bought the business. The technology is outdated (around 20 years old), and therefore is no longer supported. Granted, he made it last a long time, but in reality that hasn’t been a stellar decision. Let’s look at why.

Tom and I have had numerous discussions over the years about upgrading, redeveloping or going to a completely different system. I have warned, cautioned, scolded, and pleaded with him to “DO SOMETHING” about the system or he would eventually have issues. After all, it is his core business tool and he needs to invest some time and money in protecting this asset. But, like us all at some point in time, Tom believed he couldn’t afford the price to upgrade and claimed he was waiting for the ‘ideal system’ to present itself for the ‘ideal price’.

It was always “when we get a bit bigger or when it becomes more affordable”.

Not to say “I told him so” but the last few months have been a nightmare for Tom. Because his delay is costing him a lot both financially AND in the additional costs that come with lost value.

Here are just a few of the things he is experiencing:

  • Angry and frustrated customers. The network/server is old (it must be to support the older system) and at capacity, so it crashes regularly.
  • Angry and frustrated staff. Employees are angry and frustrated and they are leaving in droves because of the stress the slow system is causing (the last 3 months has seen the highest staff turnover than any other time in the 10 years he has owned the business).
  • Pointless downtime. Each time the server crashes there is a potential for loss of data and there is considerable downtime where his employees cannot work.
  • Loss of market share. The core application takes MINUTES not seconds to change screens so potential customers are going to his competitors, PLUS fulfilling client orders is taking longer than it should, which affects his reputation and customer service guarantees.
  • Stress and insomnia. Tom’s stress levels are through the roof and he cannot sleep at night.

Put simply, over the last 3 months, Tom has paid way more to “patch” the old system (try and make it better) than he would have with the original quote he received. Plus, he has done some serious damage to his health, his business and his reputation.

So what’s the answer?

We all want to save money and make sure our business is operating at maximum profit, but the answer lies in remembering to look at the WHOLE picture and not just focussing on the price!

Ask yourself 3 questions:

  1. Is the price of the product or service really that high?
  2. Is the end result worth buying this product or service?
  3. What will it cost if I don’t buy this product or service (list all the potential hidden costs)?

If the answers to questions 2 and 3 are more persuasive than the answer to question 1 then the obvious choice is you have to bite the bullet and spend the money to make the investment. At the end of the day, you don’t want to find yourself in a whole world of pain especially when it could have been avoided.

By way of a happy ending, Tom has now made the (long overdue) decision to move to a new system and we are helping him make that transition. He still has some struggles over the next 6-12 months which is the estimated implementation time, but overall it is a good decision and better than being stuck at the mercy of the tech gods!

Bye for now!

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