Archive for February, 2010

Surviving Tough Economic Times Part V: Don’t choose the cheap option; choose the right option.

Saturday, February 20th, 2010 by Clyde A. Lettsome, PhD, PE

Since the economic down turn, we have encountered more prospective customers that are either looking for the cheapest way to start a business or business owners that want the cheapest approach to problems they are having. Now, there is nothing wrong with seeking the best price on products or services you are buying. However, more often than not, this comes back to “bite them in the butt” because this is all they are considering, cheap. What some entrepreneurs do not realize is that cheap is exactly that, cheap, and building a business cheaply is like building a house on a shaky foundation. It will not stand when placed under stress. For a business, stress can be caused be socio-economic factors (like the current economy) or a growing business (as most business will experience when the economy has turned around). It is the latter of the two that should concern entrepreneurs the most, unless they have no plans for their business turning around when the economy does.

So what should entrepreneurs be concerned about before making those critical moves? Well they should:

  1. Understand the business and the products and services they will need to operate.
  2. Determine how crucial each need is to their operation.
  3. Consider not only the price, but the quality.
  4. Understand that a well priced product or service is directly proportional to quality. This means as price goes up usually quality goes up and as price goes down quality usually goes down.
  5. Create a sliding scale that factors both quality and cost. The more crucial the service or product is to your day to day operation the more you should be concerned with quality. If the service or product is not crucial, then it is ok to consider price more.

If you are an entrepreneur guilty of focusing on price so hard you ignore quality, step back for a minute. Do not be myopic. Consider cost, quality, and how crucial they are to the daily operation of your business. The last thing you need is the stress caused by growth bringing your business down because of a weak foundation. Taking this approach will be less costly over time and will allow your business to grow effectively.

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