The 4 Steps to A Cost Renovation

Grant Cardone sales trainer, radio host, real estate investor, and business coach is known for his statement, “Price is a myth!” He would be right. Price is a myth but costs are real and a fact. As a leader you are either controlling costs or costs are controlling you. Organizations today are very focused on cutting and controlling expenses, but what they should be focused on is controlling costs.

What Does Your Decisions Cost?

That is the question that every leader must ask themselves. When you are making decisions, you must consider all the costs. For instance stealing from your company may fill a short term need, but what is the cost to you if you are caught? If you are caught you could lose your job, increase stress in your life, and be arrested.

The 4 Steps to a Renovation

In the long term there are high costs associated with making bad short term decisions today. Just like your need to conduct renovate your time management plan you may need to undergo a cost renovation. Just like renovating your time management plan you must complete all four steps of a renovation and they are:

Step 1: Preparation
Step 2: Design
Step 3: Demolish
Step 4: Rebuild

For the sake of this post we will focus on the preparation step to costs management.

Step 1 Preparation
To prepare for a cost renovation and set up your cost management plan you need to define all of the things costing you.
There are six core areas of your life:
  1. Your personality 
  2. Your attitude 
  3. Your spirituality 
  4. Your finances 
  5. Your professional brand 
  6. Your network 

One example that will help you understand what I mean by personal costs are the costs in your personality.

Do you cuss in business settings?

Cussing is not right or wrong but what if it cost you a deal! If it turns one of my prospects off then it is wise for me to avoid it when working. What if it cost me a promotion? You must start looking at costs from all perspectives. Big thinkers and leaders today do not look to understand the expense they want to understand the cost.

In each of the six core areas there are four types of costs to consider when preparing for your cost renovation and they are:

Fixed Costs

Variable Costs

Opportunity Costs

Incremental Costs

Fixed Costs

To begin, consider your each area of your core. When thinking about your fixed costs, consider the things in your core that are fixed. What are the things in your personality (to stick with the same example) that you want to keep. You want to cut your fixed costs as low as possible. This way you can generate a larger profit and manage your opportunities. Make sure the fixed costs in your life are the most cost effective ways to support your income. Think about the absolutely most important parts of your six core areas.

When thinking about your fixed costs also think of your areas of weakness. These weaknesses are costing you and you are not going to improve them all at the same time. Then what you need to do is assign a dollar amount you feel each of those weaknesses or fixed costs are costing you.

Reducing These Fixed Costs Contribute to Higher Profit in Your Life.
One of my fixed costs, that was costing me big, was my inability to take risks. I figured it was costing me between $20,000 to $30,000 per year. In my personality it showed up as a lack of faith in God.

If I would have been willing to put more faith in God, I could have generated much more income early on in my career. Improving faith is something that reduces your fixed costs over the long term. Having strong faith is much more profitable.

Variable Costs 
These costs are the costs that are in your core, but are things that are easily adjusted. They are the costs of being undisciplined. The following is a list of variable costs from A-Z. These are things that you can give up like:

Accepting Dependency
Being Small Minded
Concerned About Being Perfect
Did You Not Asking for Help
Everyday Accepting the Word No
Frequently Needing Others Approval
Guessing and Not Being Authentic
Hurrying to Curse
Inappropriate jokes
Just Laziness
Kidding and Excuses
Letting A Negative Attitude Consume
Messy or Unprofessional Dress
Negativity with Jealousy
Operating in or Associating with Bad Company
Partially Accepting Change
Quickly Letting Failure Stop You
Really Procrastinating
Secretly Letting Fear Control You
Totally Blending In or Refusing to Stand Out
Ugly Feedback (You should take the advise)
Very Defeating Personality (Saying, “I don’t deserve success”)
Willfully Accepting Average
eXpertly Avoiding Self-education
You are Destroying Your Personal Health
Zipping Up Truth or Being Dishonest

Opportunity costs

The benefits that you give up when making an alternative decisions with your six core areas are your personal opportunity costs. The costs of the opportunity that are forfeited by making the decision of your choice. In business the term delayed gratification is thrown around. Delayed gratification is one way of describing the opportunity costs of making short term decisions vs. long term decisions.

Incremental costs

Keeping in mind that costs will creep and inch their way into your life. Incremental costs are the costs that increase based on the decisions you have already made. In accounting they define these costs as the cost to manufacture one more widget. Think of the incremental costs associated with the following:

A previous decision that is now affecting your life
A precious resource that you purchased and are not using
Are there areas that are getting worse not better?
Cost is equal to the value you give up in order to gain the desires of your mind.

Everything costs. Nothing, and I mean nothing is free. It is best to know that the products, services and ideas you pay the least for have the highest cost. You have to decide what you are willing to give up in order to get what you want.

Price is the monetary value placed on products, services, and ideas. Price is developed out of business’s attempts to cover their costs to produce, market, and sell their widgets at a profit.

Are you looking at the opportunity, or are you focused on the price? Most of the world measures their ability to afford their mind’s desires by the price of the desire, not the cost.

The world makes decisions on price. This is an epic failure with crippling consequences. Good solid decision making is made by measuring the opportunity (the upside of a decision) by the cost. Good decisions are structured with a cost plan looking at the fixed costs, variable costs, opportunity costs, and incremental costs. You get your renovate the things costing you in life by preparing, designing, demolishing, and rebuilding your costs.