The bitterness of poor quality remains long after the sweetness of low price is forgotten
“The bitterness of poor quality remains long after the sweetness of low price is forgotten.” – Benjamin Franklin
Many years ago we worked on a major project for a rather well-known corporation, and I had the pleasure of talking to the director of it. We discussed a lot of work moments. He participated in working groups in which a good deal of business and technical documentations were discussed, as well as various revisions, budgets and other routine moments regarding projects worth a middle D class sedan were accepted and rejected. It was not that routine or an interesting project, but those few hours of quick coffee-break dialogues between working sessions that I remember the most.
I was a relatively young specialist, interested in a conversation with a real millionaire who had achieved a lot. I cannot say that he revealed the secret of the universe to me or uncovered any other highly confidential information. Moreover, I came across some of his statements later in various other literature sources. Still our conversation made a huge impression on me at that time.
For example, let’s name this respected man Ryan.
Me – Ryan, why do you waste your time on all these boring meetings with us, when you could just delegate these questions to your managers who are as qualified at the project as you are?
Ryan – I equally invest time and money in my product.
Me – What do you mean by “invest”? You just order the development of new software from us, or is there something else I’m not aware of?
Ryan – That’s right, but I don’t perceive it as “ordering” or “buying” your product or software… Do you remember asking me last time how I achieved success and became who I am today? One of the rules that I’ve come up with is to consider every purchase and investment… It may be big or small, successful or not, but either way you’ve spent your money and your time in order to reach a goal at a certain distance.
I see that you don’t fully understand what I mean. Let me provide you with an example:
When I feel hungry, I buy food. I can go to the café right across from our office and get myself a nice $10 burger, or I can drive to my favorite restaurant and have lunch there for $100. Technically, I’m going to eat anyway, but if my goal was to save time and money, then I, perhaps, “made an investment” by dining at the restaurant, because I spent more time on the road and ten times more money on the dinner itself. Will my investment pay off in this case? Definitely not. After all, I did not set my goal and chose the best way to accomplish it.
Me – I understand you now. It’s definitely on the surface, but I didn’t understand it until you said it.
Ryan – A lot of people think that way, because we are used to count how much we spend and earn, however, it’s not figures that really matter.
Me – You are talking in riddles…
Ryan – There’s actually no riddle in here. Tell me, Alex, if a company starts making $10 million more profit a year compared to the previous one, is that good or bad?
Me – Of course, good! (I answered hurriedly, but hesitated, feeling that it’s a tricky question.)
Ryan – Ha! You’ve paused for a moment to think. That means you have a certain potential. Yeah, $10 million is not bad in terms of money, but what if I tell you that $10 million is 3.5% less than was planned? If you look at an income as a percentage, you begin to notice details which you have not seen before, and the 0.5-1-3% profit that you gain is, for example, a good bonus for the director, or an under-received bonus on the other hand.
The break was over, and we got back to the routine questions, paperwork and revisions. We spent a lot of time on Ryan’s project and upon completing it after several years, Ryan’s investments were fully paid off in terms of both sales and resource savings of automation, which we developed for him.
I remember having deep thoughts concerning those words. Indeed, do I often consider buying anything as an investment? Do I see an ultimate goal and understand what percentage of profit I want to get from my investment? What made me ponder it even deeper was the fact that you had to account for time invested along with your money. These crucial details are considered by even fewer people.
Over the years, working on various projects and communicating with different business owners, I began to notice that the most successful of them did not ask me how much it would cost to develop their solutions. They asked me: “How much can we make after implementing your solution?”, or “I’m aiming to generate XXX $ a year. What do I need to develop to achieve this goal?”
Indeed, after 20 years of dealing with different projects and their owners, I can say that the approach to developing or buying any software, digital solutions, hardware or anything else should first answer the question: “How much interest will this investment allow me to earn over a XXX number of days?”
Obviously, a certain amount of spending is crucial and inevitable. Buying of ten bottles of water for the office will not help you to directly gain a 2% profit per year, but if you consider it as a «smaller step of a bigger process», you will realize, that investing in water for the office saves your employees’ time, who will make coffee right at your office and keep working, instead of running to a nearby café for coffee and tea every thirty minutes.
“So, how should we consider the development of design or a mobile application as an investment?” – you ask. The solution is rather simple: you need to answer a few questions:
– How much money are you aiming to make with this instrument?
– What is the pay-back period of your investment?
– Compare what you are aiming to get with what you already have.
For example, if your goal is to earn $1,000,000 per year on the app, then hoping that the development of such an instrument will cost you $10,000 is rather naive… Just remember that no classic investment instrument gives x100 times more income per year. Then everything will fall into place. 😉
Your monthly profit is $10,000. Developing a new instrument will cost you $5,000 one-time and will generate a 5% profit increase per month. We can see the sum of $5,000, on one hand, but it is 50% profit of one month on the other hand. With a 5% increase of your profit per month, you will have fully recouped your investment within ten months. You will also receive a pleasant “bonus” in the form of 20% compensation of the initial investment.
And what about time investment? You are absolutely right – this is one of the most vital things to remember! Your participation in the development of the project is an investment too. Thus, if you decide to invest your time along with your finances, then I would advise you to invest it only in the instrument that is more likely to yield the result. I don’t know about you, but I value my time more than my money. You can always earn (or spend) money, but how are you going to get back your invested time? 🙂
In summary, I would like to add only three crucial points:
1. If you run a business, consider all your expenses as an investment in your business. Think what it will bring you in the short, medium and long term.
2. Consider expenses on a particular instrument not in terms of “how much is it for me personally?” Instead, think about the percentage of the profit of your business and your monthly budget, as well as how much your profit will increase after you invest in a particular instrument. Sometimes to invest 50% of the monthly budget to increase profits by 5% per month is a really smart move.
3. Do not forget about your time investment. In an attempt to save “here and now” you risk not only paying for the work twice, but also losing the most valuable resource – your time. It is the only thing that you cannot buy.
