Sunday, October 08, 2006

What does it cost?

What does what cost? Exactly! Often people want to know what something is going to cost. I am learning how to deal with this question. Back in the early days I could deal with it by saying it costs what it costs. There was a lot of trust. Those were kind of the good old days. Now you don't get away with that as much. The whole computer things isn't so new any more. Used to be nobody knew how really to measure these projects that well. I read a number of documents in business magazines such as Forbes and Harvard Business Review. It seemed clear to me that there was not an easy way to measure not only the cost but the return on the cost (ROI for those of you Accountant types).

Now it's different. I still don't know if many people know how to measure the return on the expense but that doesn't matter. People have to control their costs no matter what, so they want to know, "what is it going to cost?" So you have to pick a number and hope that you can live with it later. Sometimes you can and sometimes you can't . The average is what you want to deal with. Of course the longer you are in the business you have a better idea what it will take to make a project happen. You pick a number and you can't add too much to it for difficulties that may arrise because the other people you may be bidding against may have a lower number. Which there is another cost...what does it cost to sit idle? Boy you don't want to start thinking about those costs.

The funny thing is that now it's not enough to know what it costs but you have to justify the expense. Of course to justify the expense and write up the appropriate backup and documentation to go along with an invoice takes a lot of extra time, and that is going to cost somebody. Hopefully not me because if I spend all my time writting backup documents I can't make much money doing actual work, or I have to do like the big guys and start raising my rates to allow for a little idle time. Of course if you do good work then you are too busy to spend all of your time doing that, or you have to hire somebody to do one or the other. Boy now there is another person around and that raises the costs. Now I will be like the big guys, I'll have employees and they will need more time for oversite. So now I have to spend time meeting with the customer, writting backup and managing employees. Oh yeah I'll probably have to spend time finding a good Health Insurance plan and figure out other benefits for my employees.

May sound like a it's an adventure. It's business and that collection of businesses make the economy and it is sure fun to be a part of it. It's also nice to get away from it to go to a hotel somewhere walk up to the desk and say how much is a room?

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