In todays episode we discuss the idea that maybe you being a cheapskate is costing you results in your business.
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Darryl: Hi and welcome to “The My Bloody Website” podcast, where we talk about all things online especially for small and medium business owners or marketers. I'm Darryl King, I've been running with the agency for over 25 years, my co-host Ed Pelgen has been running his online marketing agency for about as long. Our goal is to cover things in a way anyone can understand and can improve how they use online in their business. This is episode 35 called: Are You Being a Cheapskate. Hello Ed.
Edmund: Good Day Darryl or is the Australian say “a tight-ass”
Darryl: “a tight-ass”; well and it's; we like throwing the odd controversial. The last few weeks we've been firing straight from the hip.
Darryl: getting all these complaints about the swear words and all that; that's fine
Edmund: well they can just
Darryl: yeah. It is what it is; alright, let's put this in context; Standing back from us as service delivery people. It's not about saying; hey, pay our rate more; it's about the concept that follows on from last week's podcast episode, where we talked about not respecting the amount of effort that goes into something and the equivalent part of that is trying to lowball and you gave an example about someone wanted two people to create results for their business for 300 bucks and I; It goes you know like; everyone wants a great deal; that makes sense, right? We all want to get things but there is a there's a point of declining returns where you say; well, If I get the lowest price of everyone doesn't mean them that; there are apples in apples; right? Just because the price is lower doesn't mean you're getting the same quality; and the; and; so the big part of this is understanding that some things cost money and if you are a professional company trying to get professional results. You can't be a “Tight Ass” or a “cheapskate”.
Edmund: that's right and we should reiterate; the context is you as a business owner, small business trying to grow your business and you're dealing with marketing service providers and all that sort of stuff. It’s about getting in the deal versus being “a tight ass”.
Darryl: Yeah and yeah it's a; it's a; it's a really interesting one to get and you get it with remote workers. You know people will go yeah; I want a remote worker and you know; I want this really really cheap rate. Then the rate might go up by a few bucks an hour and ohh no, I don't know if it's going to be affordable. these people probably driving around and sixty to a 100grand cars living in you know first world problem world's; you know, they've got businesses, staff, good income you know; they can go out on the weekend and spend 150 bucks on dinner for a couple of people without blinking an eye; you know; 30 $40 bottle of wine; no problem at all and they might be talking about a $50 a week increase for that person; right? To get a better quality business but that's a major problem (3:08…?)
Edmund: yeah; I think is very important to like; what you just said, then you describe certain type of person who is quite affluent and well often doing well and they're still being a tight-ass and I think we should also say bit; you know, we almost understand that there are a lot of small businesses for whom investing in marketing is a really big deal right? Especially when sometimes your providers out there who will take your money and not deliver or not do their best to deliver right? And like you said previously some smaller businesses where the average transaction value is small; you know, they don't have the budget but on the flip side we've seen businesses, successful businesses and business owners. Where it almost seems to be an Olympic sport to see how much they can screw someone over
Edmund: right? in terms of price and it's like; well; shit; you you've got these people; you've got successful businesses; you know, huge transaction values all that sort of stuff where; they; It's not about affording but it's like they're being overly tight ass for one of a bit of a word
Darryl: yeah; well Ed, It's about quality you know and all services you get what you pay for in a lot of business
Edmund: That’s true
Darryl: okay and the reality is if you're in the joinery business; the difference between just someone that's a carpenter and someone that's you know 30 year veteran joinery specialists might have been making luxury bow fittings and all; you know, things; there's gonna be a quality difference and you've got to determine what quality you want and I think part of it comes back from; we hear a lot; now you know I'm not getting results or it's just not working or it's crap whatever and then you investigate because we all get; when you're in this side of the fence; people don't come to you looking to change provider and I'll tell you about it's not working or it hasn't worked. So it's really important; what I find it is to look at what's being done already, so I ask the question well; how much are you paying right now? There he go; so; you know, if someone's turning active search engine optimization for someone and I hear a number like 300 bucks a month; I'm just about gonna throw up my mouth because you and I know that there's just no way; easily unless you've got someone on 2 bucks an hour offshore; that you're gonna get enough hours of quality work done and I can guarantee it's probably unlikely if you're getting a $2.00 an outpost and they're gonna do the quality. They might be able to do the hours. You just can't get it. We talked last time about respecting the effort, so; you know, that; that; you; if it's kind of take 10 hours a week; think about Edmund: Hmmm
Darryl: what three hundred dollars a month breaks down to; in a weekly budget
Darryl: that's; what is it Ed? Its 75 bucks a week so;
Darryl: that's seven dollars fifty an hour; so; alright, you're a five million dollar a year turnover business. You’re generating; I don't know? Half a million dollars profits in a year. You know; that's throwing numbers out and you're; you want someone on $7/15 hour to do your marketing; right? Seriously? Does that stack up? Do you have someone that does $7 fifty an hour to do your QA or to your salesman? Of course she don't; so why the hell would you think that you could get it the same way around.
Edmund: I don't know; I don't know and in this space to is important to recognize that a lot of this work is done on an alley right. It is what it is; what you're paying for is time on the ground and then ultimately a lot of this stuff is priced based on how many hours it will take, right? And so then; then it becomes a question of what's the difference between the hourly rates? And this is when you know some people get caught up frustrated and obviously someone overseas will have a lower rate; which is this; it's the reason why because the cost of living is lower, it's the reason why this whole remote worker industry has blossomed; right? Because you can get them to do certain work at a lower rate and obviously it starts with the low value tasks; right? oh I can get someone because it's low value because my cost is higher but you know; a really good foreign worker just you know; someone located elsewhere, who does quality work that's good at a global level will charge global rates
Edmund: if that makes sense you know
Darryl: well and yeah and look; the thing; the rate is important and it's not to say that someone at 20 $25 an hour US overseas isn't necessarily good; that's not; it's not that; that rate and a Australian rate; that you can get high quality but it's about that respect thing
Darryl: If their rate is $25 an hour and it's going to take ten hours a week to do it. You are going to pay 250 hour. You're paying 75 in Australia or US for that. There's a high probability that you're not getting both and let's be clear; there are two types of businesses; really; there are product businesses and there are service businesses. We are not alone as creative or online people to an hourly rate because you pay your accountant an hourly rate, your lawyer an hourly rate, anyone, you would pay your builder an hourly rate your plumber an hourly rate, your mechanic has a labor charge anyone that provides a service has hourly rate built in that's the way you pay. now are you going to get your legal advice for seven dollars fifty an hour and go; cool; is that the person you want standing up in court or you want to pay someone that, you know; more or qualified, more experienced to do it. Well you go; of course I do; major problem; I go to the big guns right? So you know, if Apple sends you a filthy letter; says, we're about to put you in the Supreme Court and sew you; You don't go for the local solicitor; all right; You start to look around if you've got a big intellectual problem IP problem; you go to IP lawyers and the same thing is true. If I'm not getting the results maybe the price I'm paying is wrong or the people I'm choosing are wrong. So, you know; if they tele-market you yeah; we got this great program; we guarantee to get your number one; it's gonna crush it three, four hundred bucks a month you know; all you gonna do is; said we'll send (9:32 your prop and did it; and time you bleed in the window). You just go; that seems good because the last guy he was 3k a month; right? I'm just gonna try this and see it works
Darryl: it's not a way to make great decisions and you'll get what you pay for you know; I'd see it regularly people get software coded offshore and we talked about it last time; you know, like people don't do the planning but the other problem is odd stories, late, doesn't work right; it doesn't do this; it's like well, you know; yep; you're not really paying a lot and if you don't have the experience to judge the work being done and project manage and do all that stuff maybe you need to pay a bit more and get higher quality people or
Darryl: don't just say, I've got a programmer but it's crap get a project manager get up there, pay for requirements, do this you know; get a copy writer, get an SEO person; don't get the SEO person to do the copywriting; maybe; buy a professional copywriter like get someone to do it really really well and then make the SEO person be responsible for the promotion at that
Edmund: yeah; I'm gonna play devil's advocate and say that someone listening to this podcast as a consumer of marketing service is probably going to say; you guys are just bullshitting you're just trying to justify an expensive price. What's your response to that?
Darryl: absolutely, but then; I do charge an expensive price because I think what we do provides a high value and I'd say to people; our experience and value; you get someone for 1/3 of the rate but we might do it and 1/3 of a time; sorry
Edmund: That’s it; it's a value equation; isn't it right?
Darryl: it's a value equation and it's an ROI question (return on investment) with the last couple of episodes everything we've been talking about is ROI
Edmund: so if you're a tight-assed it's because you either don't understand the value equation or you're just a bastard
Darryl: well yeah or you've just been brought up; no; people have brought up;
Edmund: he's not you know what I mean
Darryl: people brought up to play that Olympic sport you talked about you know so hegel, hegel, hegel, hegel, always want a better price. I'm; I can't remember the exact phrase but there was someone many many years ago said to me is “don't ever be afraid of paying good people to do quality work, you'll save more in your business then all the time your waste on the other option” and the truth; right? Like you go to a crappy printer and get shitty business cards or shitty brochures and you've got to fight with them and get it done and all the resentment and cost. They lose money and I don’t want to work with you again. Will develop or you know; like; just don't
Darryl: don't argue; don't argue with people that are really experienced. Validate them; do it but be prepared to pay to get in a quality resolve so that you can check that box
Edmund: hmmm and I think it's important as a marketing provider. if you; if you can; if you know what; if you're experienced and you know you can get a good outcome for a client then you need to respect your time as well and I feel a lot of people who are; who you know; for whatever reason they need the work or this is starting out; so they'll entertain these lowball offers and discussions and I saw a marketer called Dennis Yu, He had this interesting analogy and he said you know; you don't see people who need brain surgery walking to a hospital and standing in the intensive care unit saying; I want all the surgeons to come out here and I want it; tell me about; you know you don't need to tell
Darryl/ Ed: (12: attend for my surgery …….? Attend for my surgery)
Edmund: Yeah I'm looking for a good deal on brain surgery. It’s like you don't right? I mean you’ll stick to a fact
Darryl: yeah well, so let's go back last last week's episode; we talked about are you gonna do it yourself or are you gonna pay someone else to do it. So maybe it comes from that, maybe people that are buying it; that are being there think that their time is not worth it. They might they might generate a lot of income profit maybe they undervalue themselves. So they think; ah, that's how I'm going to pay or they just haven't thought about it that way, so the way they need to think about it is. if it's gonna take me six to eight hours but I can pay someone a higher rate they do it in two hours; surely that's more beneficial like; I should focus on; well they've got to stick to my knitting right; like, What do I do well I do it? Pay someone else to do it. Now, hey get the best deal, be a smart business operator but the best deal isn't always the lowest price; so you have to get the best value you; said value before
Edmund: yeah and I wonder whether it's do you think maybe it's also because people don't understand the consequences of not investing right in the right person; like, I mean you know in the legal situation people will happily pay a QC which is a you know high-end lawyer for our American friends you know six hundred bucks an hour because the consequences of not doing that are catastrophic right? I mean
Darryl: Mind you; I remember when Brendon Long came on and you know his catch cries that yeah; no one ever says out loud; gee, I wish I put my lawyer on earlier right? They always come in there's a problem. They don't do it in advance and it's the same problem right? That if you actually did all the documents up front and you thought through things. You don't always get the problems. There’s an element of behavioral economics and involved in it and there's a lot of stuff about why people make short-term decisions rather than long-term decisions.
Darryl: you know from short-term thinking rather than the long-term value equation that you're talking about and I think that's thing to challenge yourselves. Everyone when you're going to talk to providers is you know like just find out all the information but think about that long-term decision and that you mentioned just before because if I do a bad job over three or four months at a cheap price; well, using an analogy of link building right? you can get links built for all sorts of prices but don't find people that have got penalized for bad link building that had done and lost so much business from it and then had to recover. The actual expense is way more than even the fees for the people that fixed it. It’s way more than that because all the lost business, lost opportunity. All the aggravation that comes into it. That’s the short-term thinking versus long-term thinking equation. Making a value economic decision based on what's the cheapest price I can squeeze not what's the best return on investment I can generate.
Edmund: that's right; that it; sorry
Darryl: I used a story a few times about pay-per-click and about a florist and Brisbane that was spending 30 grand a month on pay-per-click advertising. Every time I tell them; they go, what that's like on flowers; I was like yeah, and I said but he didn't start out spending 30 grand a month; right? He started out tasting and trialing it and finding the providers. Once he got the system working. The reason he kept increasing it was because he was making a tenfold increase on what he spent, a profit. He got the business and he got smart about it because he got good advice. So he would be targeting offshore servicemen on Valentine's Day saying; hey, want to send flowers to your honey back in Brisbane.
Darryl: (16:30) that was showed up; we're never looking for florists on Google over in Afghanistan wherever it was that they were doing stuff. So they just went yeah. Because he made it easy, he was smart, he thought about the turn, he knew there was a market that needed things and he was making profit offer. He just kept stepping the level up until they got to the point where his returns plateaued and then he managed it around that but he paid for people to do it. Now, when he was only spending $300 a month on ads. he didn't need to spend a thousand, two thousand dollars to get someone to manage it but once he's spending 10, 15, 20 grand a month in ad spend he needs to have someone to do it because the amount of time and effort he would have to step away from the business to do it, to check all of ads were running properly that it needed an hour, a day or half an hour a day, maybe checking because he was; it was really topical and things changed all the time and there were always things and your Mother's Day, Father's Day this thing, that thing you know, I've got access to a whole lot of you know this particular time Flair. I want to change my ads. He couldn't keep up with that himself so then he had to start investing but if he's making five or ten fold profit. It’s not about oh, I'm spending ten grand and the two grand is a fifth of that. It’s about what are you making offer?
Darryl: you’re making a hundred grand the two grand is nothing; spin full grown on your provider and get better; like, think about the return because if you're only spending a hundred you're not; you're not maximizing it; you know,
Edmund: that's right
Darryl: (17:59 there’s gotta be an outline; an outline correct?)
Edmund: If that's what the PPC people say all the time; arhhh, if you spend a dollar and you make two then all you gotta do to make more money; you spend more money; right? I mean that make sense and I wonder whether sometimes it's a; the; being it; being a cheapskate is something that's in our heads because we've grown up with a mindset or a framework of thinking that; oh god I'll never pay that for that; you know, I've always got to fight for the deal and squeeze etc, etc and that forces you to think down here is supposed to thinking what's the upside you know; like, you said; am I making more money from spending more investing, more in better people and rich source
Darryl: And it's not always about money. A value equation decision isn't always about the cost and I've; I know people that have relationships that where the providers not doing the quality work. so they talk; you talk to him; talk to him; talk to him say look there's money involved in fixing it but a lot of cases they've so interlinked in these relationships that they're prepared to where the cost of not getting decent quality service provision over getting the problems fixed and impact their business
Darryl: and I look at it and go; that's just the bizarress mindset that the relationship. I'm talking commercial relationship. Someone's not providing the quality; you know, the site's not secure, the hosting is falling off, whatever are; but they're; you know, they're good pal and all the rest of it; it's like but this is your business. You’re spending money and time. it's got a run right but there and they won't fracture the relationship to fix it and be smart about it and I see that as a; you're not getting the value being a cheapskate on themselves not on the provider and their value having the relationship over the value to their business. When this person that is not providing the service properly is actually disrespecting that value to them
Darryl: because they're saying we'll love relationship is being honored don't have to provide service you know, So in the same time it's a writ; their cheap skating the whole thing by going; wow, you know I get a good deal because they're a mine or whatever it's like; no, that's a bad return on investment because you're; you don't work and right and so these are all behavioral decisions that we make and we need to stand back we need to look at; you know; go back to episodes; we said get real; is it working for you or not? You know, like, I had one where their site was offline for like ten days and then it come back up and they go; oh, it's not working for me. The site doesn't work well; oh yeah, yeah; I know they're gonna do someone else for me. What are they gonna do? I don't know they're just gonna fix it up for me.
Darryl: it's like, it's just; it's just not a good way to run your business and you know, so get real, what results should I be getting value and respect time it's gonna take to do it and then don't be a cheapskate about it.
Edmund: or A tight ass
Darryl: it like a trilogy of episodes Ed?
Edmund: I know; enjoyable; actually, I think the one of the key things it runs through this is ROI in value. Right? Understand things
Darryl: and dear listeners don't; for one minute think we're talking about you; of course we are we're all do it. Ed done it. I've done it where we make those economic decisions because the budgets tight this month or we don't have it whatever it might be but you would be better off to hold off another month and save the budget or get it right or you know work it and go you know, I can't afford a shitty provider. So I'm just gonna have to respect the fact I'm gonna do it myself until we improve our profits or
Edmund: That’s Right
Darryl: I'm gonna take a percentage of our profits and spend it on the right people and I'll hold them accountable make sure I'm getting a return but you know, if you want online to work really well. It is unforgiving, it's much more unforgiving than sending out some brochures and a letterbox drop and you know you don't get to measure it for three to four months. you can measure what you're doing day to day, week to week, month to month; you know, you deep down know that you're spending the money in the wrong way; you know, you need to fix it and fix it now and get right that's what you need to take out of this series of episodes that you could be harming your business by being a cheapskate by not respecting the time and just not even bothering to measure it
Edmund: mate that; I reckon. That's an awesome note upon which to wine this episode up. I can't say anything that's gonna top that mate. What do you reckon?
Darryl: Okay, I reckon; that’s it Ed
Edmund: awesome; guys that's it for today; Thank you very much for listening this series episodes has been quite entertaining Darryl. We appreciate having you along for the ride if you want to see the show notes get access to the resources we talked about and get notified about new episodes, Just visit bloodywebsite.com or subscribe to the podcast at Apple podcast or stitcher also if you enjoyed podcast please leave a review in Apple podcast it really helps other people find the podcast. I hope to see you next week when we'll continue this chat about my bloody website. It’s goodbye from me
Darryl: It’s goodbye from him.