We’re small business owners and we have to keep costs low. It’s part of managing overhead. In this management, there is a TRAP for which we have all fallen. If you haven’t fallen for it yet, let’s hope this blog post saves you. The trap is false economy.

What is False Economy?

False economy is cutting corners now that wind up costing you BIG later. I’ve got a few examples I’m going to walk you through.

Example 1 – Wedding Video

First comes a situation that is 100% real and we witnessed many, many times. Now, this is not a part of the industry we’re involved in any more, but it’s still a great example. Weddings. Weddings are an often tightly budgeted situation and more often than not, we’ve been contacted because the couple didn’t think about video until the last minute. They call us, we give a bid, they never respond. Or better yet, “You guys are WAY TOO HIGH, and besides, my cousin has a DLSR and he’s going to shoot our wedding for free.” This is false economy at its finest. That’s just the first half. Here comes the second.


Several months go by and we move on in our lives. We, then, receive a phone call from a distressed/depressed bride. “My cousin didn’t even come to the wedding.” Or “Our $500 videographer has been paid, but won’t return our calls!” Or “The cheap guy said he lost all the footage, we wish we would have hired you” In this situation, it wasn’t a matter of money they had to pay later, but it definitely cost them emotionally. And now there’s nothing from their wedding besides photos (if they turned out well).

Example 2 – Retail Business Hires Cheapest Contractor

The next example is better for small business. Let’s put you in those shoes. You’re a small retail store. You’ve got a lot of costs to cover and remodel is part of that. You get bids from several contractors and you choose the cheapest. Months later, you walk into your store, and there’s been MASSIVE water damage and you figure out it’s the contractor’s fault. Not only do you have to pay for a repair you weren’t expecting, 85% of your inventory is now destroyed and you have to pay for it. Once you’ve paid for water damage, your inventory, a proper contractor to do the job correctly (who also initially bid a little higher than the cheapskate), an inspector to confirm safety, etc. you have LOST MONEY.

Example 3 – Business Owner Hires Cheapest Employee

The last example is one that we have seen ourselves recently. A small business owner needs to expand and starts looking for new hires. Instead of a thorough vetting process and a decent starting wage, they look for someone who is willing to do the work for the cheapest. Months down the road, that person either quits or is fired because they just aren’t up to the required tasks. Now the business owner is out the money and time it takes to go back and fix the mistakes the other person left, manage the position themselves in the meantime, and hire and train a new employee. This one is particularly dangerous because it can sink your business.

Some things are a gamble, but going the cheapest route every single time will either end your business quickly, or it will die a slow and painful death if you end up financing and financing and financing to fix these problems. Because, at that point, not only do you lose your business, you face bankruptcy. So when you’re doing your day to day business and looking for the best deals, consider if they’re just a ‘fix it for now’ bandaid or a ‘true cure’ to the problem. 


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