What’s the Real Cost?

by Toby Dahm

It’s the question everyone wants to ask. But it’s always held to the end. Throughout the conversation, both the buyer and the seller wonder when and how it will come up. There is often some trepidation when it is finally asked: “What’s the cost?”

So… What’s the Cost?


This often creates an awkward posturing between the parties, with the seller trying to defend itself and the buyer trying to protect itself.

The cost is often described within a broad range that doesn’t excite the borrower. The indirect flow of the conversation has introduced some distrust. Conditional answers always do this. Using a range of cost sets the seller up for failure. The buyer has locked in on the low end of the range. Coming back to them with anything else will disappoint them. That’s not a good way to embark on a new relationship!

Why are we afraid to ask? Why are we afraid to tell? This is basic and top of mind. What would happen if we dealt with this up front and clearly?

I believe that what I charge is well earned. I deliver value that easily exceeds the cost. How do I know?  Our clients vote with their business. They stay on despite having lower priced offers. They see value.

Tying Different Values Together

What is value? It’s different for everyone. For some, it’s the freedom to actually work on their business rather than in their business. For some, it’s freedom from worry. They don’t need to be afraid of success and its financial implications. For others, it’s the comfort of having a partner. They value knowing they are working with reliable and dedicated people.

It’s similar to how we behave in our personal lives. If we are looking for transportation, there are many options. For some of us, there is an intangible value beyond the basic concept of transportation. Some people choose a Corvette, others a Harley Davidson. For others, a Jaguar is a must. Each brand offers something beyond transportation. It may offer prestige, exhilaration, a sense of camaraderie or fellowship, acceptance, etc. These brands have flourished because the value is real, and they know how to convey it.

Most professionals know what their product costs the user. What if, instead of being vague, we provided our best guess? Getting it out on the table in clear language immediately puts us ahead of our competition. We avoid the distrust that stems from hemming and hawing. Our job, now, is to show the client value. This is common ground. The client wants to see the value and we want to show them. They want to buy from us, otherwise we wouldn’t be there.

Finding Common Ground

Let’s say I am discussing a $1 million loan with a prospect. My best guess is that the loan will be priced at 8% per year. There will also be costs of $20,000. If I lay that out there, the cost of my loan for a year is $100,000.  This is $40,000 more expensive than a similar loan would cost at a bank. My job is to find and demonstrate how I can add twice the differential in value, or $80,000. This might involve revenue growth, freedom from administration, the ability to hire someone, launching a marketing plan, a combination of these, or something else entirely. It’s not too hard to show them how they will exceed this target, and to get them eager to move ahead with me.

If they don’t see the value, that’s alright, too. Not everyone wants a Jaguar. At least now I will have saved the time of pursuing a prospect that won’t convert into a customer. I can use that time to work with prospects that understand and want the value that I deliver.

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About the Author

T DahmToby Dahm is a Senior Vice President at Hitachi Business Finance. To get in touch with Toby, you can contact him at (248) 658-3208 or tdahm@hitachibusinessfinance.com.

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