This has been a week of indirect costs…my sister-in-law was wedding dress shopping and Dunkin Donuts announced the release of their new K Cups. Both of these involved eye-opening indirect costs.  I am a firm believer in “you get what you pay for” and I love finding the hidden costs associated with “cheaper” purchases.

So my sister-in-law goes wedding dress shopping and finds a great dress that costs $400 less at bridal shop A than it costs everywhere else.  Seems like a great buy, right?  Possibly, but possibly not.  Digging deeper, she found out that most bridal shops put a cap on how much they will charge you for alterations.  Meaning, if you yo-yo in weight over the next 12 months and they have to keep resizing the dress, they will only charge you a maximum of $300 or $500 depending on the store’s policy.  Turns out that the store that is selling the dress for $400 less has no cap on alterations, meaning that they can charge you $1,000…$1,500…etc. to have your dress altered between now and the wedding date. 

Now, onto the one topic more important than a wedding:  coffee!  I’ve been having the one-cup coffee vs. traditional coffee debate with people for several years.  For some reason, people see the Keurig machines at my house and office and think that they’re “fancy’ or “expensive.”  I tend to think that the one-cup coffee is less expensive than traditional coffee, but in an indirect way.

If an average K-Cup costs $.45 per cup and traditional coffee costs $.33 per cup, then the direct cost obviously makes traditional coffee less expensive per cup.  However, when you look at the indirect costs associated with traditional coffee, you’re going to be spending more on traditional coffee than you will on K-Cup mainly due to the fact that when you use traditional coffee, you typically brew a 1/2 pot or full pot of coffee.

Brewing a 1/2 pot or a full pot of coffee, more often than not, results in some of that coffee being dumped down the drain, making the actual per-cup cost rise.

Brewing a 1/2 pot or a full pot of coffee, more often than not, also results in you drinking more coffee than if you were to just brew a K-Cup whenever you actually wanted/needed a cup of coffee.  By drinking more coffee, you are spending more money overall (even if your direct per-cup cost remains lower).  You are buying more coffee, you are using more sugar/sweetener, and you are using more milk/cream.

These small, personal expense items can teach us very valuable lessons that carry over into our small businesses.  When analyzing various business-related expenses, don’t forget that you get what you pay for.  So, when something seems like a good deal, always be mindful that there may be costly indirect costs associated with that attractive price.

{ 0 comments }