I’ll never forget first learning the all important difference between price and cost at nine years old. It impacted my life and the decisions I made for the next 30 years. You see, all I wanted for my birthday in August 1974 was a brand new red Schwinn bicycle—a “Sting-Ray.†My parents took me shopping at Kozlo’s Bicycle Center, where the owner let me take the latest model for a test drive. I knew that this bike was the one I had to have. I told my parents, and after looking at the price tag of just about $100, they informed me that they would think about it. As my birthday approached, I daydreamed the hours away visualizing the stunts I would master riding my shiny new Schwinn. I would be the next Evel Knievel; I would build a ramp and jump 20 buses with my new bike. When the day finally arrived, my parents presented me with a very large box and I just knew what was inside. I tore off the wrapping paper and immediately saw an image of a red bicycle on the box. There was one problem, though. It wasn’t a Sting-Ray; it was some kind of copycat. This bike was similar, but the box said “some assembly required.†I knew the bike from Kozlo’s would have already been assembled and finely tuned just as Mr. Kozlo had promised. Nevertheless, I was still pretty darn excited while my dad put my new bike together and explained that this one from the local Kmart was half the price and would “do me just fine.†My enthusiasm, for the time being, would not fade. My first test drive was uneventful. The second and third only increased my confidence. By the fourth, I was ready to try the ramp I had fashioned out of a piece of plywood and some scrap two-by-fours. My first jump was a huge success ... while I was in the air. The problems began when I landed. The front tire hit first and then the back and then somehow my head and arm simultaneously hit the ground next. I lay on the ground, dazed for just a second, and took a look at my brand new bike. Evel Knievel didn’t have to worry about little Jimmy Tracy breaking any of his records. “I hate this bike,†I remember thinking as I noticed that the handlebars had become loose from the impact of the landing. I showed my dad and he tightened them up real good and promised that it wouldn’t happen again. But it did. And that’s not all: the front tire rim bent, the seat started falling down, the gears became stripped, and finally the front tire fell off completely. That all happened in the first two months. By Christmas, I was begging Santa Claus for the red Sting-Ray ... and he delivered. Every day without snow on the ground was an opportunity to ride that bike for the next six years. I jumped over ramps, rolled through mud, and tested every nut and bolt included in the Schwinn lifetime guarantee. Lesson learned. There is a difference between price and cost. Price is something we pay once; cost is something we pay over time. The price of the Kmart bike was $50, but the cost of riding it was $25 per month. The price of the Schwinn was $100, but the cost of riding it was about $1.50 per month plus one new set of tires in the third year. Because you own a small business, you already know this. People complain about price when they should be considering cost. When somebody tells me that they don’t want to pay the price for our services, I tell them “You don’t pay the price for our services; you enjoy the benefits of having them.†I go on to say, “You pay the price by not taking advantage of our programs.†People don’t pay the price for your services; they pay the price by trying to find somewhere cheaper with inferior products and poor customer support. We should never get caught saying “I’m paying the price for eating too much during the holidays†or “I’m paying the price of raising kids†or, worse yet, “I’m paying the price by building my own business.†Instead, we should tell people that we are enjoying the benefits of losing weight or raising children and managing a family. Finally, owning your business should be one of the finest experiences of your life and you should embrace it, especially when times are tough. That’s when we dig a little deeper and work even harder. There is nothing more satisfying than seeing the results of our hard work. Evel Knievel’s bike didn’t jump 20 buses; Evel Knievel the man did. You don’t pay the price for success; you enjoy the benefits of success! For once, I think I’m right.
Excellent post, I was in the mood for a story! I've never shortchanged important stuff (such as a vehicle in comparison to your bike), but I like to take cuts where possible. (Such as in food or in lifestyle)