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I know it’s tempting to try and save money, especially when you’re worried about your future in these uncertain times. It goes without saying however, this is often a fool’s errand. Often, you get so consumed by the price of the item, you don’t see the additional benefits the more expensive item will give you and your team, in terms of lower cost of ownership, productivity enhancements and greater reliability.
Just recently I was chatting with a practice manager at a Perth law firm who had suffered a system crash that took them down for 2 hours. I asked how much that 2 hour outage had cost the firm.
Now, while I can’t say for sure, as they are not a client, I would be shocked if the reason the outage had occurred isn’t because of one of the following three points.
- Their existing IT services or tech support company recommended “cheap” equipment that was not designed for the task at hand.
- Their existing IT services company thought they wouldn’t go for the more expensive, more reliable technology, so never recommended it in the first place.
- They did recommend the more expensive solution however also offered a cheaper alternative and the law firm leaders decided to go with the cheaper option as they didn’t want to spend the money.
Going back to the example above of the law firm with the 2 hour system crash. Based on previous experience, I’d estimate one occurrence cost them around a few thousand dollars of lost billable time. Then there’s the staff twiddling their thumbs while the issue gets fixed whose wages you’re paying. Imagine if that starts happening a couple of times a week. Over the course of a fortnight that’s $12,000 of lost billable revenue. If it continues throughout the month that becomes $24,000, throughout the quarter $72,000. Naturally, you can do the maths for the figure for the year.
Potentially, it could cause you to lose a very important client, who has an urgent matter that you can’t work on while the system is down. It goes without saying, you may have just been about to win a very important prospective client, however they went elsewhere because you couldn’t help them urgently.
When these things happen, its not just the direct cost of the downtime. It’s also the future business you’ve lost, plus any referrals those clients may have brought to the firm, and the referrals those originally referred brought in. Would it be inconsiderate to ask, can you afford to light that much money on fire, or let it exit out of your firm?
Consider these scenarios
Another area I’ve seen professional services firms equity principals, partners and directors make similar mistakes with “cheap” decisions is in the recommendations I make to clients and potential clients. Obviously, straight off the bat, we are not the cheapest Perth IT services or tech support company, nor do we strive to be. Some might argue that we are one of the more expensive in town.
I’ve seen them look at the dollar value of our system recommendations, implementation and ongoing support and then choose to work with someone else. I’ve then checked back in 3 months later and the IT services company are still not finished implementing the recommendations of what is a simple project and they’ve suffered untold amounts of down time, stress, headaches and lost productivity.
In one case a current client, an accounting firm, chose to do this and 6 months later he was still facing issues and the system was not fully migrated. We went back to do some ad-hoc IT support work for him and found so many mistakes in the setup and configuration it was unbelievable. It goes without saying, the equipment supplied, was not even at the same quality standards that we had recommended.
In another case, an ex-client, just reached out to me after leaving us 6 months ago, asking for a password we supplied to them and his new IT services company, at the time they offboarded from our services. Now at the time I remember thinking this client is making a bad decision. That was confirmed when the new IT company took over 2 months to complete a simple transition of services for what is a relatively small system.
As the old saying goes, the client and ex-client had “compared apples with oranges”, or in this example quality, reliable, equipment and project implementation, vs kind of “OK” equipment but not up to the tasks required and a substandard implementation of the project scope.
I know firsthand about getting this wrong and how much this costs.
Obviously, I’m not perfect with my decision-making abilities either, it doesn’t exist. In 2018, about 3 years ago now, I was faced with an important decision about some technology for my business. At the time I was struggling and didn’t have a lot of revenue coming through the door. I looked at this great bit of technology that I knew would really help me grow and scale the business but couldn’t get past the upfront and ongoing cost of the system.
So what did I do? I decided to try and make a “cheaper” alternative work that I had found. As it turned out that was a big mistake. I spent hundreds and hundreds of hours, trying to build out what was already pre-built in the solution I’d looked at previously, and even after all the additional time I invested into the technology it still wouldn’t work effectively.
After all that time wasted and about 3 months later, I then made the wise choice to invest in the business and purchased the “more costly” solution I had looked at earlier. The biggest lesson here is that I ended up paying twice as much as I should have by making this decision than if I had invested in the “more costly” solution initially. At the price I put on my time, it makes me shudder at how much this “cheaper solution” actually costed me.
What should you do instead?
When weighing up the cost of something you need to consider the following.
- What will it cost me and my team in time to either try and work out the solution myself or try and configure the solution myself?
- What will it cost me, my team and the firm in lost productivity if the system or solution is unable to deliver as promised?
- What will it cost me in lost productivity, downtime, wages, lost revenue if this solution doesn’t deliver and what negative effect to the bottom line will this have?
After you have weighed these up then consider the upside and investment you could receive.
- What benefits do I and my team get from concentrating on our strengths and not trying to figure out things we are not strong in?
- If we have a stable and secure system what is the potential positive effect to revenue and the bottom line?
- What could I use the positive effects to further re-invest into the firm to grow more in other areas?
You want to change your mindset when it comes to the cost and see it as an investment. One of my mentors puts it this way. If I spend this money today, will it generate me a 5X return on investment that makes it worth 5-10 times what you originally paid in 5 years’ time? If not, then it’s not worth spending the money on.
It goes without saying, you want to view your IT services, Cyber security services and overall technology platforms as an investment into your professional services firm. One thing you may not be aware of is the return on investment in your professional services firm can produce 100% to 200%. What is considered an excellent return on investment in the stock market is between 6% and 8% per annum.
Naturally, the investment in your professional services firm is the winning strategy. As a professional services equity principal, partner or director, you must learn to think, make decisions and act as an INVESTOR if you truly want to get ahead, understanding the value of time. Especially your own.
Want to learn more? Go to https://www.myinfotechpartner.
