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Consumers are accustomed to continually seeing hidden prices and “small” offers from cable and Internet providers. We know tactics like a one-year low introductory price before a cost spike, or automatic renewal unless you cancel 60 days in advance, or easily missed additional services that you need to cancel or will be charged for.
Unfortunately, some business consultants and other professional service providers also resort to similar tactics. But if you know what to look for, you can avoid these hidden costs.
Related: The 5 essential elements for choosing a consultant
Hidden costs
Effective partnerships should save the entrepreneur both money AND time. Not all service providers engage in price inflation tactics, but staying alert for these warning signs can prevent you from incurring “surprise” costs in the future.
Bait and switch prices:
Beware of service packages that seem too good to be true because, all too often, they turn out to be just that. An initial quote might be extremely low, but then the comprehensive services you thought you would receive are actually added to the low initial fee, making the total cost much higher.
For example, an HR service provider might tell you their monthly payroll rates without first mentioning that they have to charge you for onboarding/hiring that person. Businesses may find themselves locked into contracts that include a variety of extra “fees,” increasing the price of needed services. Always ask for a detailed list of included services and clarify the prices in advance of extra services you may want in the future.
Bundled services:
Some consultants can bundle various services into a single package at a seemingly attractive price. This can make it difficult to understand exactly what you’re paying and where the markups are. However, some components of a package may not be optional, and companies end up paying for features they don’t need.
For example, consider an IT service package that offers software installation, along with virus scanning and maintenance. If you don’t need the ongoing maintenance plan or can manage it internally, can you turn it off and save on the monthly fee? Or does the provider bundle them so they can afford to offer other entry services as a loss leader?
Specialized services without specialist skills:
Service providers may offer high-quality solutions with specialized services, but the contract does not consider the specifics of a project because the provider lacks specialized skills or knowledge. For example, a construction company may hire a marketing firm to help it create marketing materials for its potential customers, but if the company lacks experience in the industry, it may take too long to provide an effective marketing plan.
In the end, a company might pay for the exact service agreed upon (marketing help), but costing the company additional time because it creates misinformation about construction services and requires excessive review by an internal team member. Make sure professional service providers have sufficient industry experience in your industry. Ask if you can speak to some satisfied clients they have worked with in the past.
Related: Instructions: Choose a Consulting Service for Your Business
Work smarter, not harder
Working with external consultants or vendors can help you complete key projects that an internal team doesn’t have the ability or capacity to complete. Here are some tips to avoid hidden costs and ensure a win-win partnership.
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Look for an accessible partner: Avoid hidden problems and delays by contracting with a reputable vendor that provides easily accessible account managers you can speak to directly, rather than a “help desk” approach, where you submit a ticket and wait. Be sure to ask how they handle questions and problems.
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Buy at the market: If you receive a quote from a service provider that you have reason to doubt or don’t fully understand, compare the cost to a competitor to highlight inconsistencies. For example, if you receive a quote for a service, ask if they can itemize it to minimize surprises along the way. You can then approach another service provider and ask for a detailed quote for comparison, giving you the opportunity to fully understand the price differences.
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Read the contract carefully: Service fees can be applied based on usage levels or a fixed fee model. Consider the volume of service and how it will fluctuate in the future. For example, if you negotiated tiered pricing from a data provider, how would your costs change if you needed less data over a period of time? Would you be better off negotiating a lower tier service plan from the start?
Be fully informed whether or not your provider’s contract offers you a “cable company proposal”: a low annual startup fee followed by a significant fee upon renewal.
By familiarizing yourself with these tactics and asking the right questions, you can avoid hidden costs and create effective partnerships with business consultants and professional service providers. Remember, a successful partnership should save you time and money in the long run.
Related: These are the dos and don’ts when working with a third-party service provider