Don’t Confuse Low Cost with Low Price

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Don't Confuse Low Cost with Low PriceIn working with many clients over the years, I’ve found that it’s easy for some of them to confuse low cost with low price.

For example, as a business owner, I have had to hire attorneys in the past for a variety of reasons. Lawyers charge by the hour and their hourly rate can be expensive because they have to include all of their overhead within their hourly rate.

I once sold out my portion of a business to my partner. We hired an attorney to handle the sale and agreed on one that he liked because of his low price.

We went to close on the sale at separate appointments. My partner showed up the day before I did, signed all the paperwork and left the attorney’s office. I came the next day, signed off on the deal and asked if everything was in good order and had been taken care of. The lawyer reassured me that it had and I went on about my business.

About six months later, I received a visit from the IRS concerning the payment of payroll taxes that were past due on my previous business. I informed the agent that I had sold my business to my partner and that he was now liable for those taxes. Problem was, in the eyes of the IRS, we were both equally responsible because the taxes in question were incurred prior to the date we closed on the sale of the business. They were going to pursue collection on all involved parties until they got their money.

The attorney that I agreed to use at the low price came at a very high cost. He did not check that all taxes had been paid at the time of the sale.

Low Cost Is Not The Same As Low Price

LawsuitFast forward twenty years. I was served with a lawsuit by a local municipality for property taxes on two pieces of real estate that I had sold 15 years prior to the suit. The purchaser had the properties foreclosed on because he had not paid the property taxes. He had also disappeared from the face of the earth.

Due to a mistake by the title company, the chain of title was erroneous and I was being sued not only for the taxes owed but the accrued taxes for the last 15 years on property that I didn’t even own. And of course, penalty and interest had accrued for all those years as well.

When I asked why I had never received a notice of any tax due, they politely told me that it was a clerical error and legally, they were not required to give written notice. “Taxes are taxes and they need to be paid”, I was told.

I was looking at a $60,000 lawsuit and was referred to a very experienced attorney. When I was given the price, it kind of took my breath away. I paid the retainer and within 2 months the matter was settled with the county and city, the title work was corrected, I paid nothing other than the legal fees, and I never had to worry about it again.

While the attorney came at a high price, the result was a low cost, and to top it off I could sleep well from then on. I avoided a $60,000 judgment and was out of pocket a little under $4,500 dollars.

When looking for any kind of professional service, we all want to part with as little money as possible, but we do want an excellent outcome. That’s understandable, it’s human nature. I’ve learned over the years, that there are considerably more criteria in making a purchase other than price. While price is always a factor, cost is a bigger one.

In working with clients, one thing I try to convey is that they should not confuse low cost with low price.