Are You Paying for Labor or Value?
Let’s assume your business is losing money. No matter what you try, you can’t seem to find buying customers. You decide to hire a consultant. You find one with lots of experience helping turnaround failing businesses. You have all your assets in your business. If you lose, you stand to lose $1 million and your home.
The consultant tells you what he or she can do and the price is $10,000. You yelp, “$10,000!!! I’m drowning here and you want $10,000 to save my business and home?” Don’t laugh, some people do this. So, the business owner proceeds to Craig’s List and searches for a business consultant. He finds one who says he can save the business for $1,000. The business owner breathes a sigh of relief and says, “You’re Hired!”
Six months later, he’s filing bankruptcy to save his home and is out of business. What happened? Was saving $9,000 worth it? If the consultant charged $25,000 and could save your business (and home), would it be worth it? This is one of those ABSOLUTELY moments.
Are Your Expectations Based on Your Experience or Wallet?
When you hire someone to provide a service for your business, are you paying for the labor or for the value? As an entrepreneur, how you value what you buy is important and shows business acumen. There are two ways to do so: buy labor or value.
There’s a portion of business people who look at their need and do mental calculations for the time it may take, and since many people are misers, they think $10 to $15 an hour is a fair price for almost anything. Therefore, they come up with an artificial price they believe is enough (based on what, who knows) and then negotiate with that price in mind. Then they choose the vendor desperate enough to accept what they offer.
This shortsightedness could cost tens-of-thousands of dollars to correct the blunder – the cost for another consultant to fix it, and lost sales from the blunder and the time it took to fix it. Were the savings worth it?
Two Pricing Models: Labor and Experience
Now don’t get me wrong, there are times when labor is the only way to go. If you’re hiring someone to clean your office, cut your grass or take messages, a low hourly fee is justified and smart.
However, when it comes to professional services, experience is the name of the game! Do you want someone writing a marketing plan for you with no real-world experience? Would you want a photographer who takes bland pictures, making your business look boring? Would you hire an accountant fresh out of school with no track record of knowing how the IRS works as your CFO? NO! If you’re savvy.
The Price of Experience
Experience is worth every penny. You see, for someone to gain experience, they’ve had to crawl through the trenches of their chosen field. They’ve not only learned what the industry mandates, but have become never-ending students of their profession. This is where new and better ways of service are born – what differentiates them. The process and learning can take five, 10 or more years – and the longer they’ve done it, the more valuable their service!
The Old Adage: You Get What You Pay For
Quality has a price, because it’s worth it. Now this doesn’t mean automatically go to the highest bidder. What it means is apply critical thinking and pay what it’s worth.
Do your due diligence. Check how long they’ve been in business. Look at their portfolio to see if you like the quality. Ask for testimonials; see what others say. If they’ve been in business for a long time and only have a handful of testimonials – that’s called a clue. Why just two or three if you’ve been in business for 10 years?
After doing all this, ask the tough questions. Have them explain what they’ll do and WHY they’ll do it that specific way. In other words, why is your method the best? If they cannot explain it simply, they simply don’t know and are just selling what they CAN, not necessarily what you need.
Being an entrepreneur is the best way to live! You make your plan and life, live it to the full and reap all the rewards. However, keep in mind that to succeed, you need experience guided by wisdom. If you don’t have the experience, make sure you find those who do – until you learn. They will cost more than a college intern or your nephew in high school, but it will be worth it. Be prudent, do your homework, ask the tough questions and then make a decision. Once you do, have peace of mind knowing you did what a smart businessperson does and enjoy the success!
- Is Your Business Ready for a Post Covid World? 3 Tips for Success - December 4, 2020
- How to Take Advantage of Disruptive Technologies - August 27, 2020
- Social Media Has Changed How Insurance Companies Decide Your Premium - February 1, 2019