How To Calibrate Costs For Better Price Validation
Cost calibration is a critical technique for ensuring you're paying fair prices, especially when purchasing something outside your realm of expertise. By validating vendor quotes and comparing prices, you can ensure that your purchasing decisions are well-informed and cost-effective.
Here’s a recent example from an Athena member:
“I received a quote of $500 to replace a washing machine gasket, which seemed high. I asked my assistant to research the OEM cost of the specific gasket (~$250 with delivery and taxes). She then called 3 vendors for labor quotes ($150-$200 an hour), bringing the total cost to $400-$450.
While the quote I received was on the high end of the range, I felt comfortable proceeding since the part was in stock and the technician was available the next day.”
This cost calibration exercise can easily be done by your assistant to assess if you’re paying a reasonable price. Here’s how, at varying levels of thoroughness:
- “Am I getting ripped off?” → Collect a sample. Your assistant can simply look up and contact a sampling of vendors to get their price quotes and any additional context that matters to you (i.e. for an IRL purchase, you may care about the distance from your home).
- “What should this cost, in theory?” → Validate costs. If the purchase involves multiple pieces (i.e. parts & labor), your assistant can “reconstruct” the theoretical costs to do a back-of-the-envelope calculation to ballpark a reasonable range. This enables you to weigh trade-offs better. Your assistant can use ChatGPT and Google to get estimates or ranges.
- “Are there other critical factors outside of price?” → Do additional validation. Your assistant can take their research one step further by sharing various vendors’ prices and additional context with ChatGPT to confirm which would be the best option and note factors outside of cost. For example, the cheapest option may not be best — ChatGPT can help your assistant understand trade-offs with quality, delivery time, and any other factors.
In any case your assistant can help you go from research → verdict in just a couple of hours. You get to make more informed decisions quickly every time.