Skip to main content

Total Cost of Ownership


Did you know most corporations don’t just buy on price?

They typically buy on the total cost of a business; from cradle to grave.

Let’s say the US government is looking for a copier and the market value $100. Your copier costs $91. Your competitor chooses to sell for $80. In the end the business selling at $80 is going to win the contract bid. This is a "competing on price" situation.

Using the same numbers above, you hear that the US government instead chooses a business selling copiers at $105. You’re thinking to yourself, “what the heck, my copiers are $14 cheaper per unit,” which is true.

But that’s not how a corporation sees it. They look at all related expenses:
  • What is the annual cost of supplies, toner, paper?
  • What is the annual cost of maintenance?
  • The repair cost if a unit is damaged?
  • The number of hours that they're onsite? 
  • The cost of having the copier not operate?
  • What is the cost of employees having to travel back and forth to the copier?
  • Will the lifetime usage of this copier exceed or fall below the cost of employees walking back and forth?
  • How much does it cost to dispose of this copier?
Throwing in random statistics, your $91 copier is now 75% more expensive per year over 5 years while your competitor’s $105 copier is only 50% more expensive per year over 5 years. This is a "competing on total cost of ownership" situation.

Remember total cost of ownership when thinking about pursuing a corporate contract.

Comments

Thank you for your post. This is excellent information. It is amazing and wonderful to visit your site.
tail spend management services
advanced tail spend management services

Popular posts from this blog

Getting Business in Person

Today, we're going to discuss the secret to getting business at conferences, expos, meet-and-greets, any place where you are at forums where you get a chance to interact with representatives from corporations for some of the largest companies.           How many of you can identify with going to these events, walking up and down the hallways in these big convention centers, being excited about being able to get your product out there and let folks know about your wares? And you end up leaving and reflecting back on the day and saying, "Well, I got the website from 20 other companies, and I can fill out the supplier database, put my information in their supplier database, and when there's an opportunity, they'll reach out to me because I made such a connection with them."           Or they took your business card and said, "We'll have somebody follow up with you." Or you got the business card of everybody at the booth saying, "Hey, I just

The #1 Rule to Landing a Corporate Contract

My entire professional career was based around designing, negotiating, implementing and managing strategic alliances. I did this from all three sides of the table:  as buyer, seller and minority business owner.   I started my career doing research for Shell Oil Company and eventually moved up to supply chain management work. Here I negotiated strategic alliances with some of the largest suppliers in the world.  You see, in the world of corporate, strategic alliances are tightly integrated relationships where resources are invested by both companies . The partnership allows for both businesses to prosper - clearly, a key component of the revenue driver, cost drivers or profitability.      In 2004, I decided to leave my corporate career and start my own company. I decided I was going to approach a friend of mine, who happened to be a supplier diversity manager, about doing a contract with her company (mind you, t his company is and was one of the top five largest oil and

Essential Factors to Consider Before Pursuing Strategic Alliances with Large Corporations

You must be committed to benchmarking and finding out what the best companies in the globe do in their supply chain before venturing into a Strategic Alliance.  You also must determine if your target organization’s supply chain or purchasing department is involved in strategic planning so that they can get the maximum benefit of understanding what they buy, how they buy it, where they buy, and that they are buying it at better than competitive levels. Many companies as recently as 5 -10 years ago set goals of purchasing 3% of their annual goods and services budget from  minority-owned businesses, and 2.5% for women-owned businesses. We lately have seen numbers as high as 11-15% for both.  States like California USA have set goals as high as 50% for their public utilities of which large corporations such as AT&T and PG&E are included. Women-owned business participation in corporate contracting is advancing at a much faster rate than minority participation. Women initial