What is your time worth?
Ah, the time value of money question. This is something I struggle with personally as I like to find the best possible price. The problem with that is the best price is not always the best value. To get to value you have to look at other factors such as time, aggravation, etc. I have a couple of examples from my own experiences so I will leave you with those and you can draw your own conclusions. Whether it is business or personal, make sure you are looking at the big picture, the total “cost” not just the price. Realistically value your time and aggravation.
Case Study #1
The reason I bring this up is that I recently decided to add a phone to my cellular account with a major carrier. Now I am not naming names because I know some of you will say it was just the wrong carrier but I have had enough experience to know that this happens with any service provider so let’s just set that aside.
So I am thinking, I have been a customer of theirs for over a decade, the have a large presence in the market and I just want to add a new phone to my account, simple right? Well first off I saw the phone I wanted had an option to purchase it as refurbished for $50 less, ok I want to save $50 darn it! So I start the online buy process but get a little nervous at checkout because I don’t want to mess up my upgrade eligibility on my current line that I will be replacing the phone on soon. Also, the system was going to charge me a $36 activation fee which I knew a live agent could easily waive. So I call customer service to help me with the transaction. Of course that dept. can not help with an online transaction so they transfer me (2 tries to get to the right dept.) and they can help and waive the activation fee but they won’t be able to give me the refurbished phone so there goes my $50. But no, I want it all! Anyway, there is more but you see where this is going. All in all I spent at least a couple hours researching the phone, the best pricing, etc. over the last few months, now one final hour of final pre-purchase analysis, and at least 2 hours of my prime time PLUS the aggravation of dealing with, holding, poor customer service reps, etc. And as we know, you just don’t spend an hour researching something because any time you switch gears it takes time to switch back to something productive on top of that.
So that’s a solid 5 hours we can account for, and I am sure if your were on the outside looking in it was much more! But if we stop right there I think it could be easily justified to have just bought the phone either online paying the $36 activation but getting the $50 off the phone or buying from the rep and paying $50 more for the phone with free activation. The point here is what it your time worth? Is it worth all that trouble to save the money? Did I REALLY save anything? Did this phone just cost me MORE because of the way I did it?
Epilog: The refurbished phone arrived DEFECTIVE and I had to spend another hour with customer service, time to set up the replacement phone and ship back the old one
Case Study #2
Let’s take one more real world example that had much higher stakes. I was opening a retail based business a number of years ago. I negotiated 3 months of FREE rent (rent was $7,000 a month) and I was going to do the build out of the space. I found contactors for various trades that were reputable and could move fast but the cost was higher then I wanted to pay. I spent a lot of time searching and interviewing to find less expensive alternatives. Well the searching alone cost me at least a month of time and then the smaller, less expensive contractors could not start for a few weeks and were working with smaller crews and were overall slower and less efficient.
Fast forward to the finished product, it took me significantly longer to complete the build out and order furniture and supplies because I was looking for the best possible price, not considering value. If I had just done a modest amount of research and paid a little higher price I would have been EASILY open 2 months sooner. If I paid a little more for a rush, I could have open another month earlier. So all in all I would have been at least $14,000 ahead and as much as $21,000 ahead considering the free rent I lost out on. I did save some money but It was nowhere near those amounts. Being a cheapskate in this case cost me a lot of money.
But is get’s better! Because of the delays, I could not open until mid-November and by the time the marketing hit and people knew about us we had lost out on a lot of holiday revenue. If I had opened just two months sooner in September, I would have had everything in place to run full speed for the entire holiday shopping season and that would have led to a significant amount of revenue.
What my experience has taught me is that I will NEVER repeat case #2 again but it is easy to lose sight of this principle on the smaller purchases. Funny thing is however that if you run the numbers and do the math, the smaller purchases are the bigger losers on a percentage basis. Have you ever gotten in your car to go from one store to another to save $1? Hmmm…
Tom Schroth, aka “Business Yoda”, is an Entrepreneur, Speaker, Sales Trainer, Marketing Expert, Business Growth Consultant and Founder of WhiteBoard Group, LLC. Tom’s background is in start-ups, turnarounds, sales & acquisitions and franchises. He works with businesses to identify opportunities that will lead to increased sales and revenue using strategic analysis, marketing development and sales force improvement to help them “Perform at Their Highest Levels”. www.businessyoda.com
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Tom “at” wboardgroup.com | 888-724-7684 (888-Schroth) | www.wboardgroup.com