SETsquared Blog

Day 5: Ignore hidden costs at your peril

One company practicing their USA-focused pitch for an invited audience of VCs and advisors

Friday brought a presentation about “Market Exploration and Validation”.

The point that jumped out for me is that as an entrepreneur, you not only need to identify a customer, create a good product, etc. But you also need to be aware that the biggest enemy in most technology sales is always “Do Nothing”.  The prospect does nothing, accepts the status quo, and does not invest in your product – or anybody else’s. There are lots of things you can do about this, but one that usually gets overlooked is the “hidden cost”.

For most products, there’s a hidden cost.  Imagine you are selling an outsourced accountancy service. Why should companies pay a higher hourly rate than they could pay by employing somebody directly? This is where the hidden costs come in – overheads, qualified supervision, recruitment, etc. These hidden costs increase the value of the service over the inherent perceived value.

The same principle applies to most products and services. Where is the hidden cost – servers? Management time? Supervision? Find and highlight the hidden costs and you will be able to charge higher prices and differentiate better from your competitors.

Ignore the hidden cost, and you risk being treated as a commodity provider at best and simply greedy at worst.