Posts Tagged ‘Social Captial’
The Cost of doing things For Free
Tuesday, July 27th, 2010Alright, let’s talk about MONEY!!! When a small-business owner does something for a client for free, there are many more costs involved than what the business owner might think. The obvious costs are the physical materials you may have used or given away in your act of kindness (this cost, regardless of how big or small, is the least of my concerns for this topic.) Then, there is the cost of your time spent in performing the service (this is the second least of my concerns in this matter.) The value of the physical goods and the time spent performing the service are well-meaning charitable acts of kindness and should be viewed as such. But, there is a disservice that you are doing to yourself, and to the recipient of the act.
First, the disservice to yourself. Here is the background that we must start with. The purpose of business is to provide something of value to someone else. If you are providing value to people for free, how many people can you realistically provide high value to, and still sustain shelter and a family? A very small number. If you receive money for providing that value, you can do two things: you can sustain a shelter and a family, and you can put money back into the business, both to improve the quality of the product and to hire people and serve a greater number of customers. If the purpose of business is to provide something of value to other people, then the more people you can provide value to, the better your business will do.
Whenever you do something for free, you limit the number of people you can provide your value to.
Second, the disservice to the customer. I have a friend who provides an excellent education-based service. He recently decided to accept a person’s request to attend his classes for free. As it turns out, this person came to the first class, raved about how good it was, and has never come back. My friend hears from him on a weekly basis (every time there is a class) and he apologizes for not coming to the class. His friend’s lack of commitment is directly proportional to his lack of payment.
In this case, the problem is not that the person doesn’t have gratitude or doesn’t appreciate the gesture, because he expresses these feeling to my friend every week. This person desperately needs this class and he knows it, but, without his financial commitment, his physical commitment stays low too. He is literally taking something that would help him a great deal and throwing it in the trash, while other people are spending their hard-earned cash for the same thing.
In so many cases, things given for free turn out to be a lose-lose proposition.
I am not suggesting that you never give anything away for free. If you have a marketing strategy that involves giving a gift or giving something of value at no charge, that is something completely different. Marketing strategies and charity are two great examples. But when someone comes to you and expresses a “NEED” for your product, but they are in need of it for free, keep in mind the consequences of the lose-lose proposition.
If you really want to help, get creative and help the other person come up with something that they can offer you that would be of value to you, and require effort on their part to produce. In the end, this act will prove to be more beneficial to both parties.
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