Saving money can really affect your long term bottom line. And not in a positive way.
You need to understand the interplay between many factors to make sure you are looking after the future of your business. The biggest things to consider are, price, quality, and the relationship you have with the person you are buying from.
I was with a client, John, and we were talking about how people buy in the building industry. We looked at the difference between price and value. And the impact that trust and rapport have on them.
Let’s take a closer look at what can cost your business dearly in the long run.
John had always believed in comprehensive quoting. As a Plasterer, he includes everything involved in his plans into the initial quote. Because of this, he receives feedback saying that he’s more expensive than the competition.
If the quotes are taken at face value and price is the only factor considered, then John wouldn’t make the sale.
What happens when you look deeper?
John believed in building rapport with potential clients. So, the second time he was told his quote was much more expensive than his competition, he asked to see the other quote.
Side by side, the difference in price was impressive. John was able to quickly see why.
John has been transparent. Everything was included. There would be no surprises or blown budget for his customers.
The other quote was missing quite a few elements. They weren’t upfront and transparent. And nothing is free. Someone had to pay, which means the client will get charged extra later on.
So many businesses focus solely on price. Which would cost extra in money, time, and stress in this situation.
When buying for your business, you need to consider what’s potentially missing if there’s huge discrepancies in quotes. Ask questions. Build a relationship with your suppliers.
When selling, are you ensuring you are fully transparent as well as following up every quote to ensure you have the opportunity to explain how the price is created?
Buying or selling, rapport will support your business in the long term.
You’ve checked the quotes. Both are transparent. No surprises. What could go wrong going with the one that saves you cash?
There’re many circumstances where it’s very worthwhile to investing more upfront so you can deliver a higher level of quality. There’s no point saving money now if your reputation suffers down the line and you lose clients.
It’s not just about branding. Your business purchasing goes hand in hand with an understanding of quality.
Don’t get me wrong, just because someone is cheap doesn’t mean they’re not good. But if you overlook the business relationships you’ve built and the quality you’ve learned to expect to make purchasing decisions based on price it can cost you time and money.
You can’t put a price on how your suppliers treat you. Especially if you’ve built a relationship over time.
You can’t be quoted on that. When shit hits the fan and they do everything to help you fix it.
That’s not on the invoice.
I’ve seen it too many times. Cash flow starts to shudder. Business owners look for short cuts instead of trying to streamline their own operations. Cutting costs rather than looking at productivity. It never works long term.
Are your buying habits affecting your relationship with suppliers? Do you nurture a relationship over time? Or are you likely to buy from someone for 10 years, only to ditch them for a cheaper option? The outcome there is always the same. Your business, in chaos.
So, you’re in a good place with your business.
Clear quotes. Both incoming and outgoing. Solid supplier relationships. Business is going well.
The next step is where we focus on quality and overall relationships. Keep an eye on them and be able to recognise if and when something starts to shift and change.
That is your chance to go back and negotiate for a better deal. Or to see if there’s a better fit for you for now. Businesses do grow and change over time.
But don’t get sucked into new, shiny, empty promises.
You need to be clear on the reasons why you’re making a change and be ready to form a new strong relationship if you’re going to take on someone new. You need to do your research. Testimonials. Referrals. Make sure they can deliver the quality of service you’re used to, as well as the goods.
It’s important to fully understand and respect the value proposition of the people that peripherally support your business.
They might be $100 more than your new alternative. And the new option might be well regarded.
But what’s the relationship look like overall?
Competition is healthy. And they want to seduce you.
The difference between price, cost, and value it should be clear. And the long term health of your business is always your number one priority.
You understand that saving money now can really affect your long term bottom line. And overall business success.
Of course, we should all be reviewing where we spend our money, how we spend it, and how far it goes.
If you’re strongly considering going with cheaper on paper right now, ask yourself if it’s going to cost you time and money in the long run.
Your relationship with suppliers is important. Will you burn those bridges?
How to review your expenses.
Take a close look at where we can cut costs and save money.
Review value proposition. Always remember the relationship between value and cost.
Negotiate with your current supplier. A good place to start is a 2 – 4% discount if you pay within 7 days.
Quality + delivery control come with nurturing relationships over time. If it’s time for a well-considered change, review by referral, not by shiny new offers.
Cheaper now can cost you time and money in the long run. And may even cost you your business.
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