The Opportunity Cost of Quoting
Updated: Oct 29, 2021
Quoting work isn’t free – no matter who does it.
You have probably read about this topic before from me, but I thought it was high time I dusted it off again as a reminder, EVEN IF YOU ARE PRICING YOURSELF, IT ISNT FREE.
What I’m talking about here, is sorting out this myth that building business owners seem to have, that if they do everything themselves it won’t cost them a cent. Not true!
I get that as business owners at one point or another, we have to wear a different hat and perform a different task. Lots of hats and lots of tasks! But I would hazard a guess, that the only hat you really want to be wearing, and have a qualification and experience for, is the tradie hat, right?
Now that doesn’t mean that all those other tasks you can just ignore… they still have to be done. But they aren’t FREE. And every time you spend hours on them, you endure something called an opportunity cost.
Opportunity cost is a value placed upon the work you COULD be doing, if you weren’t doing the task in front of you. There is opportunity cost for everything in life, it’s how we make decisions about how we spend our time. In business, opportunity cost is important because there are only so many hours in a day so the decisions we make about how we spend that time need to be carefully managed.
As an example, if you spent 100% of your time on sales, what would be the benefits and pitfalls? Well, you would probably have more work rolling in the door, but no time to oversee it yourself to make sure everything was done correctly. If you spent 100% of your time on HR, you would have a really happy well put together team, but no work to keep them going. You see what I mean?
Now if we talk about pricing your work, if you spend time doing it yourself, what are the benefits and pitfalls? Honestly? From most of the conversations we have with our builders, the main issue for them regarding pricing is confidence. Given that QSing is a specifically taught skill, of which most builders have never been taught, pricing can be scary, and often feels like you are ‘winging it’, and then ‘you win some you lose some’. Given the entire success of your business sits on the pricing being right, I think it needs a bit more consideration. It often takes a builder many hours to price, it’s not something you can just sort out quickly, it needs time and consideration. That time is one of the opportunity costs, it may be taking time away from a build onsite, meaning that you are having to pay someone else to do your work. You might get some things wrong in your pricing, meaning that you have potential costs you could be charging for but are not because you just don’t know.
So how to remedy this issue? I have two suggestions for you, and they both come from us.
Outsource your QSing, have an expert do it for you, build the cost into your margin and it becomes a cost to your business that is already taken care of. Not sure how? Ask us.