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Why Do We All Lie To Ourselves About Costs

Updated: Mar 21, 2023




It only costs……Why do we naturally underestimate cost? Once I had a call with 2 other VP’s, the president, a product manager and 2 manufacturing engineers about whether we should charge a customer for 15 broken power supplies for $400 each or just swallow the cost as goodwill. I noted the call was madness as the total time for the people on the call cost $10,000.


Whether it’s a new product, a new initiative, a new hire, a trade show, or basically anything we just don’t think through cost, we in fact hide it subconsciously to ensure the emotion drives us. That’s good people, bad people do it to pull the wool over other people’s eyes.


Let’s take an example of justifying attending a trade show. The booth is only $10,000 but what of the carpets, booth design, pens, flights. Ok, getting closer but what about fuel to the airport, parking? What about coffees, drinks, and more coffees to help overcome the drinks? What about the bowling - we’re doing bowling right!


What about people, they cost a lot of money, people look at their salary and think that is their cost – it really isn’t because it does not include, your equipment, employer taxes, insurance, healthcare, let alone the people who manage you and for some, the building you sit in and the others who service you (HR, Payroll, Accounts, etc). Most people cost somewhere between 1.4 to 2.5 x their salary.


Now let’s add one more thing which may shock you…… There are not 365 days in a year, well not in a business year at least. There are 260 working days – but you will be sick and take vacation so it’s more like 230.


My safe number for a sales or marketing person is at least $1000 a day to exist. Most are a lot more like $1500- $2500 but if you think its below $1000 you need to really do some math(s). What’s worse is that $1000 is without opportunity cost – what else could they be doing? For example, instead of going to a trade show could they be finding or closing more business?


Scare yourself with cost so you can be honest and see if it’s really worth it. Doing good things are going to cost money – do things because they are right not because they are cheap.


And for those who hide things as cheap to get what you want – you’ll get found, out trust me.

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