For better or worse, I get to see the accounts of about 100 SME’s in detail on a regular basis, usually all the way down to a transactional level. Unlike publicly listed company reports, where detail gets cumulated away, you get to see the finer details of what money gets spent on.
In the “outrageous, but uncontrollable” category are:
- business rates, which, certainly in London, have reached ridiculous levels (as a percentage of rent).
- Employers National Insurance, now at 13.8%, which is a nonsense.
In the “outrageous, but controllable” category fall a few things that I still struggle to get my head around in value terms.
The first is website development. The prices being paid relative to the quality of what is being built for any commercial entity is still out of control. I could understand it in the Y2K era when HMTL was new, and tech specialists were thin on the ground.
My favourite addition is “monthly maintenance fees”, as though its some sort of wear and tear asset like a car, instead of a program they’ve developed with holes in it.
Another is bespoke, specialised or advanced software. Well, it’s called bespoke, but what it usually is is 95% pre-made, with a few alterations available from a small list of fixed options. From my experience, for every costly added feature that’s included, there is an equal and opposite trade-off involved that restricts something you’re getting now or is available elsewhere. And when a basic, no-brainer, ‘feature’ is absent, you’ll be told “We’re trying to figure a work-around for that” (you’ll be working around, not them) or “We’re looking at that for the next release”.
The reasons it’s not bespoke is that the supplier only wants to make it once, with the only costs in sales and training – that’s the beauty of software.
Of course, tacked on to the cost of this is usually a consultant to “integrate” the software with whatever you’ve got going on in your business already, or mandatory fees to “train” users.
Search Engine Optimisation consultancy is a magnificent business example of “in a world of blind men, the one-eyed man is king”. The work guarantees no income for your business (and so is never tied to that), just promises better results on search engines and if you’re lucky, more visitors to your site. Of course, Google is smarter than any SEO consultants, and promotes sites based on – shocker – their usefulness to those searching. The better your business or relevance to searchers, the more visitors you’ll get. It’s an unspoken fact that nothing artificial is going to be effective on Google for long: Google constantly changes their algorithms. Get your basics tags and metas right (matching popular searches relevant to your business), and you’re wasting your money paying for anything else except what will improve it for customers.
The problem in all three areas is that, quite understandably, no-one on the buy side has any real understanding of what’s going on or how it works, so once someone has decided “we have to have it”, you’re hooked. Software, SEO and web development is on every predecessor’s P&L, so, good golly, we’d better add it to our budget!
The final one, and probably the most inexplicable that I see, commonly with no relation between the bills and results, is PR retainers. Bills roll in each month (prepaying for the next month) for £3k, £5k, £10k, in most cases for zero results, but probably worse, when there are “results”, they bear no resemblance to the fees paid. And I’m not saying that because the results are (as you’re told) hard to measure, but because its a phenomenally overpriced industry for the value provided. Yet the bills get paid month after month.
In each of the above four cases, the prices you’re paying – and this is critically important in business – aren’t tied to the benefits you receive or the results you achieve. They’re usually looked at by the buyer as a “cost of doing business” or something “we have to have”.
The seller isn’t pricing on benefit or results, they’re pricing on their costs: they’re covering salaries (which are based on living costs and/or lifestyle), employment costs, office costs, marketing costs and salespeople.
And in each of the four cases, the seller shifts the risk from themselves to the buyer with fixed fees, and payment in advance.
You can’t blame the sellers for this – its great business for them, and they’ll charge whatever the market will bear.
When you see buyers spending time and energy being aggressive about stationery suppliers or insurance renewal quotes, it boggles the mind to see payments made without question on website development, software, SEO and PR.
Anyway, rant over. My point was – and I do have one – is that if you really have to have them, chase the best value for money for them. I’m amazed at some of the commercial quality and low prices for services listed on People Per Hour.
Our companies have bought some amazing services at incredible prices the last twelve months after searches or putting buyer listings on that site – largely due to the huge numbers of suppliers without business rents, rates and so on price in. PPH act as the intermediary, providing a safety net: when you accept a bid, you use your credit card and put the deposit or invoice amount “in escrow”, and its not released until you accept that the work is done to your satisfaction.
The seller usually has no business overhead to cover, and just price for their time. They fill “trading gaps” with business from People Per Hour, and while many do it permanently, many are between jobs, on maternity/paternity leave or simply retired. I also find you get a broader range of services on offer, the business matters more to them, and at a fraction of the price.
Give it a look next time you’ve got to buy something for you business. Go to the site, and put anything you’re trying to price in the search box – you’ll almost certainly be amazed at the prices and quality on offer. Touch wood, we’ve had nothing but great experiences.