Subscriptions – The hidden cost of business or good value?
Posted by Tony Ozanne at June 10th, 2013
The understatement of the century would have to be ‘the internet has changed businesses’. You and I know it has and it appears to be here to stay, but that’s probably another discussion for another time and another blog topic. One thing that has become dominant in the business persons online situation is the dramatic availability and the hidden accumulated cost of subscription items or expenses in the P&L.
I fell for this trap too and although only have a few years as a business owner under my belt, I was quickly lured into the concept of subscriptions vs. outright paying, or in some cases I didn’t have the option.
Nearly anything and everything we want to use in our business in an online content is now readily available to purchase ‘on subscription’. We make monthly payments of $9.99, $19,99, $29,99, $99.99 etc. to access all the really cool and ‘necessary’ programs or features that we use on a day to day basis. I am sure the lure of the price point being a perceived an inexpensive amount sucks us in, and no longer do we need to pay the hundreds or thousands of dollars to buy the CD and install it, and then pay again for the newest version a few months later. It makes sense doesn’t it?
Just looking quickly at mine, and I am sure I have missed some but I have Time Trade, Google Account, web hosting, email storage, a marketing site, Mail Chimp, MYOB, CRM, AFL Foxtel for iPhone (Ok not really business but a good distraction!). While it isn’t the most extensive list, it all adds up to a few hundred dollars each month.
I could have spent more if I had gone to Windows on subscription (but haven’t). I was going to by my new Mac (which I am not using still as a bit scared) on Flexi rent (but just bought). I could upgrade LinkedIn account to Premium. I subscribe to some media sites. I have resisted some of the well scripted sales pitches from seminars for $1-2000 per month ‘limited’ access mentoring and business development courses plus there are a few other things as well but have been controlled! All this yet my business isn’t complex so I don’t have the need for all the other wiz bang tools some of my clients use like Quote Roller, Woofu etc. The end result is these costs can get out of hand if not careful and they are all cash flow impacting costs.
I haven’t done the cost analysis and used some of the cool NPV formulas that I learnt when I did my Masters, but I am sure they would be more cost effective to do this subscription format vs. buying outright, so I am not against it. My only word of caution is that these so called good value items may be in fact changing buying behaviors or forcing us to buy things we may not necessarily have bought if we had to outlay the cost upfront. When you look at your YTD costs for these, I am sure you will be surprised by the amounts, and I haven’t even considered the countless number off Apps I buy as ‘it’s only a dollar’ or the new ones I have bought for the unused Mac!
At the end of the day, I urge all to look at these as you would with any other business investment, and evaluate the cost/ benefits of the product and the impact it will have on your business.
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