Lowest Price Doesn't Always Mean Lowest Cost

Cost Versus Benefit

We used to run monthly surveys to find out about business owners visiting our site and what issues businesses were facing today. Oddly enough, I am not one that usually fills in surveys on websites and usually hits that X to close, but I am very thankful to those that took of their time to provide us quite a bit of insight.

One month, I asked a question concerning what was most important when business owners look to purchase business services. Since it was anonymous, we do not know the size or type of business that answered the questions, which would provide more insight, but would most likely have reduced the number that answered. We did add one answer to see how many would select it “I look only to purchase the lowest priced services.” Most that answered the survey selected several answers that focused around “looking for client references” and “looking for credentials, experience and backgrounds of those performing the services,” which we would have been expected. There were a few that selected the “lowest cost option,” but what was interesting is that they only chose that as an option without choosing any other.

Unfortunately, we have worked with business owners who opted for the lowest priced option from a service provider, but they did not end up paying less in the long run. Many ended up paying more due to substandard work or work that was not appropriately performed for that type of service provider. They paid more because after choosing the low-cost route, they had to hire others to come in and fix issues caused due to lack of experience or background. In many cases they had to start from scratch and pay again. Anyone in a service industry will tell you that to fix the “mess” of another costs more than starting from scratch. Those that chose professionals with credentials, experience, and proper references may have paid more initially (, for a good reason), but they received what they paid for the first time. There is the old saying, " You get what you pay for."

You only have one business, and you have invested your time, sweat and money. As business owners, we all have to be cognizant of spending our money wisely on those items with the highest return; choosing the lowest priced option for services may not be the least cost option for you in the long run. We have clients who have hired accountants without professional designations; bookkeepers who have little to no experience; lawyers who are not experienced in the type of law they required. Some of the worst travesties are those that purchased marketing services, SEO, and websites from someone who sent them an email or called them on the phone with a promise of a low-cost option. In all the cases listed, instead of hiring professionals who charge based on their experience, they opted for the lowest price route. In the long run, this turned out to be the most expensive route.

Here are a few examples from our clients who first opted for the lower-cost solution.

  • The accountant had not compiled the statements or filed their taxes correctly. Not doing either caused an audit and fines from the CRA.

  • The lawyer was not a Corporate Lawyer, so all of the points were not addressed appropriately in their employment contract, so they were not covered when the employee left.

  • The bookkeeper misclassified expenses, so they had to pay their accountant at five times the rate of the “low-cost bookkeeper” to clean up their books, so proper statements could be generated, and their taxes could not be filed.

  • The web developer did not present a professional image for the business, the bounce rate was over 75%, and they were not found except by their business name on Google. They sold them on this was a custom website and ended up being a template that was not even modified.

In all cases above, the client went with what they felt was the lowest price alternative for their business, and in all cases, it ended up costing them more money in the long run. They had to hire professionals who were experienced to come in and fix the issues that “the low-cost solution” caused, which cost them more than having had them do it initially.

If you are looking for someone to help you with your business, no matter what the services are, only making the decision based on price, there is a good chance you will end up spending more in the long run. I would hope if you were going to a doctor about your health that you were choosing the professional with the right credentials, experience, and background versus price. The same should be valid for your business. Most of the business owners that answered our survey opted for selecting professionals with experience, client references, and credentials, but some only selected “lowest price option.”

There is usually a reason that someone is the “lowest cost option.” Most professionals in the service industry will charge similar prices based on expertise, experience and specialization. If you do not want a low-cost surgeon operating on your heart or an inexpensive auto mechanic working on your $200K sports car, you should not want a low cost professional making a mess of your business.

In most instances, we all usually purchase services from others because there is a lack of expertise by those within our business to perform the function. You should be able to find out what the average rate is for the profession you are looking to engage that is based on the level of experience you require. For example, if you require a tax expert, you are going to pay more for that expertise versus a regular accountant, as this is a specialized skill. You really should perform due diligence to determine if the person you are hiring has the proper schooling, accreditation, experience, or expertise required to perform the service you are hiring them to complete. Once you are ready to choose someone, you should look for what their clients say about them if that information is available. If client testimonials are not available, ask for client references. Going this route, you will get the services you require performed in a professional manner, which will end up being of a more significant benefit than saving a couple of dollars in the short term.

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