Financial icon Warren Buffett (WIKI) likes to remind investors that the price of something is what you pay for it, while the value is what you get in return. That’s why it’s easy for something cheap to be more expensive in the long run. In fact, prioritizing short-term budgets almost always comes back to haunt you.
I’ve seen this many times over the course of my career.
Business owners and marketing managers will want to save money by passing over something they know has solid value, only to regret it later when having to redo or re-solve a challenge.
One example is that they may forgo investing in an inbound lead generation program that attracts a growing list of leads over time, opting instead for an advertising campaign that creates a sale this week, but stops delivering the moment they stop funding it.
“Chains of habit are too light to be felt until they are too heavy to be broken.” – Warren Buffett
What may seem like the safer choice at the time, leaves them starting from scratch again when it’s time to prepare a new effort later. Had they made a more strategic decision the first time, they would enjoy bigger returns over time.
We know, deep down, that reaching goals takes a level of focus and commitment. We conveniently forget all the bits of wisdom we’ve absorbed, however, when time and money are on the line. Most of us struggle with this at some point or another, I think, but lately I seem to be noticing it more than usual.
Today I want to share seven different ways I see where we can confuse sticker prices with bottom-line realities, and how they can really impact our businesses…
1. Choosing Cut-Rate Suppliers
When a competitor undercuts you, how do they do it? Chances are, they rush through a project, curb scope, use inferior components, or skimp on service. Guess what? When your vendors quote unbelievably low prices, they are doing the exact same things.
If you want experienced insights, creativity, and client-focused care, it’s realistic to expect you’ll have to pay market rates. Otherwise, you’re very likely going to be disappointed with the results.
2. Hiring the Wrong Employees or Vendors
No one can run a business on their own. That’s why it’s important to have employees, vendors, and service providers who demonstrate the same ethics and dedication to the job that you do.
Bringing those talented and trusted people onto your team undoubtedly means paying them more. On the other hand, hiring the wrong team members can quickly ruin your reputation, not to mention the relationships you have with customers and colleagues.
3. Choosing Ineffective Training Programs
Hiring the right people isn’t enough. To help them maximize their talents and stay on top of their respective fields, it’s a must to train and motivate them at every turn.
The quality of the training programs you set up is going to dictate whether the days and dollars devoted to them will amount to a valuable investment or not. If you choose training based only on price, you can’t be surprised when you get little or no improvement in employee performance.
4. Failing to Invest in Customer Delight
If you don’t take care of your customers, someone else will. Do everything you can to ensure they are as pleased as they could be with you and they’ll have little reason to even think of taking their business elsewhere.
Cut corners when it comes to their satisfaction, though, and you’ll always be at risk of having your buyers take their cash to a competitor. The customer might not always be right, but they are always valuable. Remember that and make your day-to- day decisions accordingly.
5. Under-Funding New Initiatives
In order to become a leader in your market, you have to generate a workable plan and execute it. But, if you don’t put time, thought, or resources behind your inspirations, they are bound to fail from the start.
Then, you end up in a situation where you have the worst of both worlds: your great idea won’t come to life, and the little bit of money you did invest in it has been wasted. If you’re going to move forward with a project, do it in a way that’s likely to succeed. Otherwise, what’s the point?
6. Being Reactive Instead of Proactive
Your industry is going to keep moving forward. You can either lead that process from the front of the pack, or constantly find yourself chasing others who are more forward-looking.
It costs time and money to become a trendsetter. You have to invest in expertise, education, and development. Those investments pay off time and time again, however. What’s really expensive is constantly finding yourself behind the ball and struggling to keep up with the latest changes or ideas as a runner up.
7. Ignoring Known Problems
Most of the problems you run into in the course of running your company aren’t going to fix themselves.
The malfunctioning piece of technology won’t suddenly start to work, the failing marketing campaign won’t miraculously turn around, and the under-qualified vendor you chose isn’t going to suddenly start providing premium work.
If you’re afraid to spend time or money fixing the problems that are right in front of you, you’re just inviting them to become bigger and more disruptive in the future.
A big part of running a successful business is determining your budgets and making judicious decisions about what you can and can’t afford. Unless you have unlimited resources (in which case I’d love to do some work for you), you’re going to have to make tough calls and figure out the trade-offs.
As you do, though, remember that an all-too-common mistake is the same one the world’s premier investor warns about again and again. Focus too much on sticker price of something, instead of what you’re going to get in return, and you’re bound to make decisions you’re going to regret later.