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The Perils of a Cost Mindset

Shift to think opportunity not cost.

As old as the Romans, the expression “it takes money to make money” is part of every business’s lexicon. Money gives value, clients want value, and the business world goes round and round, right?

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As a business, by rule, you value things, tangibles that translates into cost. And if we shift the focus from cost to opportunity, ultimately, everything will fall into place as it relates to your client or customer.

Cost is an easy gauge for a business and how it operates, but focusing on cost is literally selling yourself short. Opportunity is value, results, and future-focused. And shifting from a cost mindset to an opportunity mindset is the first entrepreneurial mindset shift.

Cost vs Opportunity

Every time we spend money, we immediately feel a loss.

It’s a simple calculation, it’s gone once you spend. It’s a painful sacrifice so when we look to the immediate future, we want a tangible return on that cost. We want that ledger sheet to reflect the value of the things that cost our business money.

We feel that can control our business better if we are cost-focused. The team I build costs x, the factory cost is x, I charge the client y. Simple.

Maybe not so simple; for example, I worked at a company that brought in a consultant who analyzed the operations to cut costs. They successfully cut costs across the board. The first year, everyone got paid, costs were down, and everyone was happy. But the following year, all of the things that required a creative vision for the future was no longer there. Teams were gone, the tech was gone, and with it was a whole lot of value. And we had to rebuild.

The best way to cut costs is to stop doing business altogether. That costs nothing. But it also creates nothing.

Building a business unavoidably involves costs.

Think of it as a black box factory, raw materials go in one end, and results come out the back end. But if you neglect to put in the raw materials and starve the process, you will never get results. Obviously, you want to spend on the right raw materials, be developing the right programs, and create something of value. 

You have to commit to what you are investing in to get the desired results. Gauge your reaction to this: I have a client who spends $20K – $30K on Google ads a month.

If your response was to say, “I could never afford to spend that much!” – you are cost-focused.

Now let’s shift the focus to opportunity: off of those ads, my client makes $100K-$150K in sales a month. And now that we are in an opportunity focused mind, the question is, can they spend more and get the same results? The opportunity is the ability to raise prices, make more sales, engage more people. 

Shift your entrepreneurial focus to opportunity. Anytime you incur a cost when you invest in your business, think about the results you will get, what kind of opportunity will open up to you. Manage the opportunity, manage the result by making sure that you are getting your return. The more you invest in opportunity, the better and more efficiently your business will scale.

An opportunity mindset is focused on illustrating your value and what the client will get when engaging with you. 

Cost Focus is Procrastination

The saying goes, “nothing worth having comes easy.” One of the reasons entrepreneurs focus on cost is because it’s easy. They can control the cost of things and put a value on them. Opportunity is about the future, which is inherently a risk because the result isn’t guaranteed. And that’s scary. 

I see this a lot in negotiations. Professionals across the board, lawyers, accountants, and consultants set their rates on a cost-focused basis. Your time is worth x per day or the hour, and expectations will be vague and lofty. When it comes down to the bill, whether you have fulfilled the promises, it’s easy for them to be surprised at the bill, and you are back to the negotiating table again. You’ve delayed negotiation, which is a form of business procrastination.

On the other hand, if you approached the negotiation with an opportunity mindset, by demonstrating the opportunities and transformation that lies ahead and laying out what life will look like after working with you, you can avoid the sticker shock altogether. Even if it’s an estimate of a larger project, with a plus or minus 20-30%, at least the expectation of the outcome is clear. The negotiation is upfront, and the client can decide if they want that value now or not. And if they don’t, it frees you up to work with the ones that want that transformation, those opportunities.

There is No Crying in Baseball and “Just Because” in Business

Professionals Don’t Deserve Anything.

Another symptom of the cost-focused mentality is “I am an education professional; therefore, I deserve to get paid well.” This attitude is based on cost. Just because you have incurred a cost for your effort, education, and work to get your expertise does not implicitly mean you have done anything of value for me.

Value comes in the transformation for the customer. If you are well educated and know what you are doing, you should define the value and opportunity you visualize for the client. If that vision isn’t there, then the value reverts to cost. And that’s the easy way out.

Resting on the laurels of past sentiments of “I am a professional…” is the equivalent of “just because,” and the world doesn’t work that way. You deserve to make money when you deliver the transformation. The fact that you are qualified, educated, and trained means that you can provide the transformation. The only value to your client is in that transformation.

And if you are focused on how well trained you are and your past education or how well trained you are, you are only focused on cost. And your client doesn’t care about cost – they only care about the value, the opportunity. Again, pivot your thinking around the cost-focus concept and focus on what it takes to deliver opportunities and what it means to the client. That is the value of what you bring to your customer, not the past.

It Takes a Great Effort to Change Your Thinking

Chaning your thinking around concepts is challenging.  It goes against our intuition. But because you have that professional training we just talked about  –  you can do it. Everything will fall into place when you visualize the future and look up from the ledger sheet. Marketing is more effortless, delivery is more manageable, and ultimately it’s easier to collect for the effort you gave the client in delivering those transformations.

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