The Difference Bwtween Cost and Value

Winters in Manitoba are hard on everything, including the paving stones around my gate. The heaving and shifting created by the frost made it so my gate would not close and thus re- levelling was necessary. This would be a task taking a few hours for anyone with a modicum of patience – which I don’t have. So I called the paving company that had installed the paving stones some five years earlier to see what it would cost to do the job. The sales rep came by and set the price at $188 everything in, which I considered a reasonable price considering the value I place my sanity and sanctity. It was a small job I was told and they would do it when they had a crew in the area. 

Some weeks later while I was in my basement office, my wife let me know that the paving company was here and they were working on the paving stones. I came upstairs just as they were sweeping the last of the sand between the stones and cleaning up to leave. We estimated they were there no more than about twenty minutes. 

Was I ripped off? The answer depends on my perspective. If I based it on an hourly figure it was well in excess of $500 per hour. But what if I look at the completed job from a value perspective rather than a cost per hour perspective?  I wanted the job done well - which they did; I didn’t want the personal frustration of doing it myself and I wanted it done for the price we had agreed to. Would I have felt better if they had taken two hours? Possibly, but they would not have a better job done. So in the end I should have no complaint.

Recently a client requested a proposal for my consulting services. In the course of conversation the client asked how much time I estimated it would take to complete the services. The client was asking a cost question. In response I invited them to consider a value question; what was it worth to their organization if I was to complete the services to their satisfaction.

Hourly rates for consulting services are usually a lose-lose proposition. The client has no way to determine how many hours it actually takes and so they can be left wondering if they were overcharged. As a consultant I am constantly aware of the time I spend lose the satisfaction of providing the best service for the client, regardless of the time it takes.

A potential client called me to discuss a huge problem in their organization. This problem was affecting each of their various branches in a number of countries throughout the world. He talked about the potential fallout if the problem was not solved. So I posed the question:. “If I could solve your problem for $50,000 would you consider that good value for the money spent?” Without blinking he said they would have no problem finding the money and paying the fee. (The fee was a small fraction of that amount because I could do it for much less and still be paid well.) The key of both the client and me is value. Their value is having the issue resolved for a cost reflective of that value. My value is providing the service in a manner that satisfies the client and a fee reflective of my time and expertise. 

A good deal is when we have determined the value of something before we look at the price tag. We need to beware of knowing the price without considering the value.