The Cost of Not

The other day I sat back in my chair and thought about a decision process that we went through when evaluating the purchase of a certain software package. I thought about how many other business owners are faced with that exact same algorithm as they evaluate both purchases and opportunities wondering aloud how many folks take into account the “Cost of Not.”

A few years back when I first developed our Comp Care product we spent the first year visiting companies discussing our new service excited as we knew that businesses of all sizes are faced with the cost challenges of employee injuries. The problem was in that first year very few companies showed interest in the product. The reason; we were speaking to the wrong companies as employee injuries and workers compensation costs were not burning issues in their budgets.

Thus the time, cost, and energy we put into those visitations did not pay off. I reflected on the cost of traveling and delivering all those presentations to folks that were not a good fit for the service . Further how about the opportunity cost of not delivering those same presentations to companies where the cost of employee injuries was high. Clearly my system was broken and I knew it.

As my team and I sat through the software presentation my mind was buzzing. I knew instinctually that by collecting data and identifying companies who were cost inefficient due to employee injuries we could become far more efficient in how our firm spent our sales and marketing resources which would drive our acquisition costs down and profits up.

At the end of the software presentation the representative gave us the price to deploy the software which was on the face of it a fairly large number relative to our other technology spends. I  turned to my team and asked them their thoughts. They all agreed that the software would help us organize our marketing efforts and was exactly what we needed. They all felt too that the “cost” of the software was surprisingly high. I explained to the team that the cost of the software if evaluated by itself would seem high. However if you compare the software cost to how much it’s costing us to meet with and market to the wrong customer base the software purchase was an obvious bargain.

As the team filtered out of our conference room I reflected on how many organizations truly know the “Cost of Not”. There is so much focus on what the price of “x” is without truly understanding, or admitting the cost of not trying to solve for “x.” The good news is that for those companies that truly understand the “cost of not,”  focusing on solving their most costly problems and evolving the marketplace rewards them greatest as their margins, resources, and competitive positions strengthen compared to those focused on the price of “X” rather than the “Cost of Not.”