Fact of Life (And Business): You Get What You Pay For

The above title says it all. No matter how you try to justify or spin it, it’s quite simple: in life, you do get what you pay for.  No matter what products or services you are talking about, no matter if it’s in business or in your personal life, you get what you pay for.  You can try to save with DIY projects but sometimes it just makes more sense to hire an expert in terms of what you get for the money. And if you are the type to only use free services, you shouldn’t expect much at all in terms of assistance or troubleshooting (ever try getting help from Google on any issue?) . 

 

Trying to cut costs in the office

I know a couple of guys who run a CPA office.  Not a big place, just the two of them and a secretary. About a year ago, they started to lose some clients; some were due to death while others due to their businesses going under in the poor economy.  Logically, the first thing they did was discuss cutting back on costs, like using generic ink and toner, cancelling the bottled water service, switching to a new telecom service.  But the one thing you NEVER do is cheap out on what directly affects your output, which in this case is tax preparation software.  The boys decided that they would make the switch from the leading (albeit most expensive) tax package to a fairly new name in the game with much less experience and a much smaller price tag.

Fast forward to the next tax season, and well what do you know? The new program didn’t convert all of the previous data properly, and for their bigger clients it didn’t provide the necessary tools they needed. As far as the customer service, it was a breeze to get through to someone–most likely because they didn’t have many customers to service–although the expertise of those agents wasn’t close to that of the more expensive company they ran away from.  I heard that and literally had to bite my tongue so as not to laugh.  I felt like asking what they could have possible been thinking when making that switch.  The last I heard, they are in the process of making another switch up to a pricier program, but not at the same level as they were originally at.

The lesson here: in life (and business), you get what you pay for.

 

The used car conundrum

My first car was a 1986 burgundy Pontiac Sunbird with an oxidized hood and roof.  Well, I purchased the car in 1994, making it approximately 9 years old at the time, and it was supposedly cared for by a mechanic acquaintance of the family .  I was assured that aside from the physical appearance (which he couldn’t control very much), the car was in perfect health.  Now I can’t remember how many miles were on the wreck, but it wasn’t a really high number for the age, and it only cost me $1,100 so I had my first car. 

The details are a bit fuzzy at this point, but I do recall having to drive out to Brooklyn from Staten Island a few times for issues such as the timing belt needing tightening or outright replacing at one point, but nothing too serious.  That was until I tried driving it to Buffalo and back in my first year of college. When I tell you that I could have run faster than the car was going uphill, it is no exaggeration!  The car had no pick-up, no power and, to finish off the story, the car died on me going down a hill!

The lesson here: in life (and business), you get what you pay for.

 

You would think I learned my lesson with cheap cars after that, but unfortunately that wasn’t entirely the case…. 

 

The used car conundrum II

The car I purchased to replace that piece of junk, wasn’t much better, and why would it be? Realistically it couldn’t be all that big of an improvement if a college student was purchasing it almost immediately after his first car suddenly died.  But, I was able to get a 1991 Geo Storm for a reasonably fair price (or so I remember).  The problem with this car wasn’t so much the engine as it was something completely different and ridiculous.  Back up in Buffalo for the 2nd year of my college career, the Storm was great, or so I thought.  That was before the winters and the freezing temperatures.  So, what went wrong this time?  You may never believe this, but the door handles would freeze and snap out of place! Yes, essentially it was like a shoulder dislocating and needing to be popped back in place, except we didn’t have time to wait as we would be freezing, so it was off to the back so one of us could climb through the hatchback and open the doors from the inside!

The lesson here: in life (and business), you get what you pay for. (No matter how ridiculous the story may be)

 

The job ad with the lowball payments

Ok, so this one isn’t relegated to the businesses out there.  You know the ads I’m talking about on craigslist and in the local newspaper.  The ones seeking someone to answer phones, file, take dictation, clean the office, get the dry cleaning, or drive the boss around (well maybe that last one was a stretch).  Then when you get to the compensation part, it’s for like $8 an hour, or just over what minimum wage is in that area.  I don’t know who comes up with these things, but I swear it’s like they think they are the ones who get the short end of the deal.  Here’s how it sounds to me:

All we wanted to do was to pay someone a garbage hourly fee to do everything that no one else wanted to do around here, and give it their all, with a smile on their face and bells on each and every day.  We can’t imagine why they only lasted a few days and seemed so pissed while they were here.

The same thing goes for the people who don’t want to pay a professional to cut their grass, trim the trees, wash the car, etc.  If you go to a neighborhood kid and offer him/her a nominal price to do the job (and they know, believe me they know or their parents will step in) what on Earth would make you think that they would even care enough to do a complete and exceptional job?  It’s not like they’re trying to start a business doing it, and they know exactly how much effort should be put in commensurate with the pay. Plus, kids don’t have the longest attention spans these days (then again, neither do many adults for that matter).

The lesson here: in life (and business), you get what you pay for.

 

You use free stuff and still complain

You know who you are. You use open source programs such as OpenOffice, have free email accounts like Gmail, AOL, Hotmail, Yahoo, etc., host your site or blog for free on WordPress or Blogger. Yet, you always find something to complain about. Or if something really isn’t right and you can’t find a support number you bitch even louder. Guess what, when you get things for free, expect to make some concessions! You can’t have your cake and eat it too–there’s no fee for things because they may not have customer service staff or an on-site support team, or maybe it’s made up of volunteers who simply can’t get to you, “Mr./Mrs./Ms. Important Big Shot In Your Own Mind”, right away. Deal with it.

The lesson here: don’t be cheap and you won’t have as much to complain about!

 

Look, it’s all well and good to try to find the best deal you can, but there comes a time when you have to realize that it’s not always in your best interest to be cheap and cut every corner you possible can to save a buck or two.  Sure everyone likes to get a bargain, but it shouldn’t come at the expense of quality, nor should you be foolish enough to think that  If you are that foolish I have some bad news for you:

 

It’s a fact of life (and business): you get what you pay for!

  • http://twitter.com/moneybeagle Money Beagle

    Very true. The issue becomes how do you afford to pay for quality, because often the up front costs are prohibitive. Think about concrete roads. We could get 2-3 times the life out of a road if we used more materials, but the cost is about 1.5-2 times as much. It gives a better return on investment, but the problem is that we are limited in what we can spend from a road construction standpoint, and using the more expensive material either means we have to put in half as many roads (which is usually not an option) or double the budget (also not an option). So, what do we do? We still put in less quality roads and replace them more often. The same principle applies to many people who would love to spend more on quality but are unable to get that foothold to really start.

    • http://www.dollarversity.com Eric J. Nisall – DollarVersity

      I totally agree. The problem lies in where the money is being used frivolously rather than constructively (no pun intended) particularly when it comes to the roadway example. Take for example Miami-Dade County here in S. Florida: the Marlins new stadium was about 80% funded by tax dollars and now the team is fielding the lowest payroll in the major leagues and has alienated a lot of people fans or not. The county would have been much better off using that money to fix the roads, build more schools, keep public service operations like police/fire/medical services funded. It’s all about the choices made both in the present and the past which will prevent the best paths in the future from being viable options. That’s why I’m such a strong believer in not placing too much emphasis on either the “here and now” or the “future” but placing equal importance on each (a little off topic but it ties into the convo).

  • FrugalPortland

    Is your advice, then, to not buy used cars, or just not buy junkers? I like “do not complain about your free software” advice most of all.

    • http://www.dollarversity.com Eric J. Nisall – DollarVersity

      No advice, just warnings to keep expectations in check when getting involved in certain things like buying a used car. The software one is one of my pet peeves; seeing so many people trash Google or Automattic (developer of WordPress) or any other company that gives its product away when something goes wrong. If someone wants to have their hand held or immediate support then they should purchase a product or at least a service plan, not bitch and moan when they aren’t spending a dime to support the functions they want or use :-)

  • http://twitter.com/krantcents krantcents

    I always buy quality, but at a discount either at a discount store or online. I will buy rather expensive shoes based on comfort. I keep my shoes a very long time. I have a pair of dress wing tips that are nearly 35 years old. They still look very good.

    • http://www.dollarversity.com Eric J. Nisall – DollarVersity

      I do the exact same thing when it comes to clothes. I would prefer to spend on quality clothes that will hold up over many washes/cleanings as well as being made from better materials to being with. I live very close to an outlet mall, so I hit it up every few months and have come away with 75%-90% off of the retail price all for sacrificing “seasonal updatedness”,

  • financialuproar

    If you take this post to its logical conclusion, then there’s no such thing as value. Everything would always give you the exact amount of utility as the price dictates.

    We all know this doesn’t happen in real life. I book my hotel long in advance, then somebody swoops in and gets the same room for half the price on Hotwire two days before. It’s the same thing for flights, food, or a million other things.

    You’ve had two crappy $500 cars. My Dad’s $800 car lasted 10 years, and only needed $3000 of repairs during that decade.It is entirely possible to buy a cheap car and get decent use out of it. Not that I’d recommend it, but still.

    • http://www.dollarversity.com Eric J. Nisall – DollarVersity

      That would be true if people were logical Nelson. Hell, even I can admit to not using logic and letting emotions get the better of some of my decisions. It’s more of an exaggerated point than anything else.

      There is value in many things, it all depends on the perspective of the individual. The problem is that many of them don’t realize that they cannot expect every single thing to provide them with the value they anticipate.

  • http://twitter.com/Eyesonthedollar Kim

    We actually see that all the time at work. People want the cheapest glasses or buy them online then come see one of our trained opticians and complain about what poor quality they are and want us to fix it for free. If you want cheap, you get what you get. If you want them to last and have warranties and free repairs and adjustments, then pay a bit more for quality and service. We all can choose what is more important. Just don’t complain if you choose cheap and you get cheap.

    • http://www.dollarversity.com Eric J. Nisall – DollarVersity

      I go through the same thing, Kim. You don’t know how many times I have a client say something to the effect of “My taxes were pretty easy to do with the software, but I wasn’t prepared to pay what I owed”. Well, they get what they pay for–an aftermarket solution rather than a real person who will check up on them and periodically see where they stand during the year.

  • http://www.narrowbridge.net Eric

    I like the anecdotes. Great stories to drive the point home.

    • http://www.dollarversity.com Eric J. Nisall – DollarVersity

      Thanks man. Although, I kind of wish I never had to deal with the car crap, since it was a really frustrating thing to deal with.

  • http://twitter.com/RFIndependence Pauline

    there is no such thing as a free lunch. I learned the hard way that in many situations being frugal is all about looking for value instead of being plain cheap.

    • http://www.dollarversity.com Eric J. Nisall – DollarVersity

      People are always looking to get something for nothing, and you hit the nail on the head with the value/cheap distinction, Pauline. Then again, some folks can only look at the short-term and seek out the lowest cost ignoring the long-term savings and value provided by spending more on quality in many instances.

  • Brick By Brick Investing

    I like the last statement. If you’re using something for free you have no room to complain!

  • holly

    Yes, I agree. “You get what you pay for” is generally true. I have thought that many, many times as I have had to get rid of things that didn’t last. I just had to replace my coffee maker that was only a year old. It cost $14 when I bought it. Go figure.

  • AvgJoeMoney

    I love the business story at the top. This reminds me of a Tom Peters (management guru) story. He says that sometimes you have to cut back, but just remember that you can’t shrink your way to greatness. Anyone thinking they’ll cut costs and come out ahead of the game is sadly mistaken.

  • http://twitter.com/PelicanOnMoney Pelican on Money

    Isn’t that the truth! :) Same with food, you buy junk you turn into junk, which leads to junk-related problems. Some people complain food is expensive… well, do you want your body to be cheap? LOL. Great points Eric, especially the CPA example – priceless.

  • mbhunter

    As price approaches zero, demand exceeds supply. The people you attract with free services will bleed you dry.