Whole-Life Costing

Too many of us, faced with a purchasing decision, will opt for the cheapest quote. That might be fine when we are shopping around for a particular brand of some commodity. On other occasions, there are often hidden costs over the life of an asset. If we take the time to understand these properly, we can often save a good deal of money over the extended period that we plan to keep something.

Buying

Understanding the whole-life cost of an item helps us to make informed decisions when purchasing.

Selling

Presenting an accurate projection of whole-life costs when we are selling and ensuring that these are compared objectively with our competitors can be a real aid to successful selling.

Things to consider

Procurement costs

Do you need to write a requirements specification?
How much time will you devote to research?

Capital

The headline cost that we always consider.

Installation

Some more expensive items we need for our business can prove much cheaper to install than equivalents that appear less expensive.

Disruption

Think about the time you will spend managing changes or without access to something on which you depend.

Interest

££££££££££ – and forecast to rise in 2011

Insurance

Not just cars…..

Running expenditure

Consumables, all those fiddly bits they never tell you about.
There is a reason that printers are cheap!

Maintenance

Scheduled or not, it might be expensive.

Upgrades

Included or extra – check the small print. Especially with software.

Training

Time and money to consider.

Removal

Will it need specialist de-installing?

Disposal

Can you trade it in? WEEE is now an issue.

Expenses

For bespoke work and services, these can be extra.

Termination

Some service contracts have a termination penalty.

…………..

There is always something else.

When Buying

Request a statement of whole life costs for bespoke items. For expensive standard items like printers and cars ask about running costs. For services, read the small print and make sure that you understand all the likely costs. Get expenses capped or rolled into the standard cost – making sure you understand what you are negotiating and why. Negotiate termination clauses away. Think through the whole life of the product or service and understand all the implications. Collect the facts and use them in your decision.

When Selling

Make it easy for your prospect to understand the value that you are providing over the whole life of the relationship. Without knocking your competitors, make sure that your prospects have all the facts and data that they need. You will already have designed your Value Proposition to be compelling. Now you need to provide the right information so that there are no surprises.

WEEE

The Waste Electrical and Electronic Equipment Directive (WEEE Directive) is the European Community directive 2002/96/EC on waste electrical and electronic equipment which became European Law in February 2003. The directive places the responsibility for the disposal of waste electrical and electronic equipment (WEEE) on manufacturers. Companies should establish an infrastructure for collecting WEEE, in such a way that “Users of electrical and electronic equipment from private households should be able to return WEEE at least free of charge” – retailers can still charge for collection though!

Real Ways for Small Business

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