My daughter Emily wants a horse bedroom and she is very specific about the design: her favorite color blue on walls, curtains made of fabric with horses, a place to display her horse collection, and a white loft bed.
Emily and I picked out her new loft bed on the IKEA website. Delivery from IKEA was $69 but, since the bed was $99, it seemed crazy to spend more than half the cost of the bed on delivery when I could do it myself for less. Our Honda Civic wouldn’t hold the bed, so I reserved a Zipcar truck for three hours at $11.25 an hour (cost: $33.75). Very smart thinking, I thought.
We hit traffic and lost about 20 minutes. I wondered if I had reserved the truck long enough, so I extended our reservation by an hour (running total: $45.00 and still saving money!). We stopped to get a snack (total now $50.65) and there were delays checking out of the store (add 30 minutes to reservation, total now up to $56.27). We grabbed dinner on the road and lost 30 more minutes in traffic, bringing the grand total to $80.15.
Uh-oh.
We got home, carried the very heavy boxes up three flights of stairs, and returned the truck. Although we had a fun evening together getting Emily’s new bed, not only did I waste time that I could have used to make a bunch of money, but the final solution was both more expensive and less effective than just having them deliver the bed in the first place.
Many businesses fall into the same money saving trap. They implement homemade solutions to cut costs, but end up spending more money and winding up with a worse outcome in the end.
Here’s an example:
One of my clients was having trouble with the office computers, which were running too slowly.
An employee who knew about computers was asked to handle it. They upgraded the RAM (memory), installed new hard drives, and optimized their systems with defrag. But the computers still weren’t fast enough, so they called me in to take a look.
After an audit of their equipment, I realized they were upgrading desktop computers that were more than five years old. When I asked them about replacing the desktops, they said they didn’t want to spend the money when they thought they could upgrade what they already had themselves.
Here’s the problem:
When I started out on my IKEA journey, I didn’t anticipate the traffic, the delay at the store and the cost of the food. Each increment was small, so no flags were raised. But when I look back I realize that, instead of spending five hours and $80.15 (and eating dinner in a truck), I could have simply answered my door and said, Please put it over there. But home delivery had seemed like an unnecessary indulgence.
The same thing applies to the way that companies make decisions. They may think, Let’s do it ourselves; let’s spend a few dollars on a short term fix; let’s avoid a big investment in the name of saving money.
But running a quality business requires an investment in infrastructure. The time and money you save on the cheap will cost you that and more in the only slightly longer term. Make sure you don’t overlook the hidden costs of do-it-yourself.