This article article was published in the "Martinelli Newspapers" in the May 11, 2006 weekly issue of The Westchester Crusader, The Rye Chronicle, The Eastchester Record, The Pelham Sun, The Sound View News Home News & Times, The Mt. Vernon Independent, Harrison Independent
and North Castle News

Submitted to The Martinelli Publications on 5/2/2006 for publication in the 9 papers on 5/11/06

Life and Money TM - "On Value - Part 1"

By Frank Sisco, CPA, PFS

Copyright 2006 Frank Sisco

Office Tel (914.381.3737);  Cell - 914.589.1013; Email – ideasmoney@aol.com

www.LifeAndMoney.com

(Word count = 1,560 including 72 words for About the Author)

The value cycle works something like this.  When businesses and professionals provide significant value, the word gets out.  And the more confidence that the providers of services or products display about their value, the more people want to engage their services.  Then, the more these providers are used, the more experience they get doing good work and honing their skills.   Their capacity to give value grows, as does the positive impact.  Here's a quick story about a dentist who gave significant value.

When my daughter, Kelly, was about twelve years old and needing braces, my wife, Lorrie, and Kelly had two meetings with a local orthodontist who came highly recommended by a school acquaintance.  He examined Kelly and then in a follow-up meeting he discussed procedures.  My wife and daughter spoke highly about him and his plans for straightening Kelly’s teeth.  They said they were impressed with his clarity of purpose, straightforward speaking style, and his warm and caring manner. 

One evening we all visited the orthodontist to finalize our agreement, to commit to his plan, and to pay a deposit.  I realized that Lorrie and Kelly were already sold on the value of his services.  But I wanted to be sold too, as his fees amounted to thousands of dollars.  So, I figured I would ask a few key questions, and possibly negotiate a better deal.  As we sat around a round table in his large office, I inquired about his services, especially about fees.  He told me he hoped that by removing many of Kelly’s teeth, the remaining teeth in her crowded mouth would straighten more easily.  He said that if that came to pass, his fees would be lower than the estimate he gave us.   I was impressed by his professionalism and his plan, but I was somewhat surprised by how expensive it seemed. 

When I asked whether his fees were competitive, he told me calmly and not defensively that his fees were much higher than his competitors.  I was stunned by his candor.  He was matter-of-fact, just telling me straight out.  But I was getting concerned about costs.  When I asked how much higher, he told me he was higher by about 25% to 30%.  He was not embarrassed or the least bit uncomfortable.  I was shocked at how smooth he was.  He then looked directly at me, eye-to-eye, and added in a confident, yet not arrogant, tone, "Let me put it this way.  The competitors are the Chevrolets while I am the Mercedes Benz."  He paused about four seconds, started a warm smile, leaned a little closer and said, in almost a fatherly manner,  "Now, Frank, don’t you want the best for your daughter, especially in a world where appearance is so important?  A set of beautiful teeth can last a lifetime!" 

After a short pause, he then asked, "Will you put your faith in me?  Do I have your commitment to go forward?"  The guy was just great!  Self-assured, yet not boastful.  Powerful, yet sensitive and tender.  Firm, yet gentle.  I ate it up.  Of course, I agreed to his work and his fees.

It turned out that in eighteen months, after the removal of many teeth and after wearing modest behind-the-teeth braces, Kelly’s teeth were remarkably beautiful.  He finished six months ahead of schedule and about forty percent under his original estimate.  To this day, when I see Kelly smile, once in a while, I think of that orthodontist and the wonderful value he bestowed on us.  And how he did it.  Confidently.

Go to a business-coaching seminar and you are likely to be advised that you should determine what your "value proposition" is and how to communicate it to your marketplace.  In a world of incredible choice and speed, if you think you understand that which you offer the marketplace to your employer, customers, or other businesses, you should take a fresh look.  You must continually refocus and sharpen the range of your products and services, your methods of doing business, your pricing, and the underpinnings of your overall strategies. 

One thing is clear.  You must give real value, with a good plan, and confidently.  Like the orthodontist did.   If you own a gas station that has only two pumps, an unkempt appearance, and average prices, then you are probably in serious trouble. Giving out trinkets and coupons is not enough to get customers to come back. You may need to add a convenience stop for beverages, snacks and newspapers.  You may need to wash every windshield, dip every oil stick, and check every tire.  If you have a bay, offer quick oil changes and state inspections.  Install a car vacuum machine and an assistant to do hand polishing by appointment.  You get the idea.  Focus on delivering real value to your customer.  If you are an employee, reevaluate your capabilities, and freshen up your skills even if it means taking evening courses or a part-time position for on-the-job skills.

Giving real value is critical to financial success in the ways I cited.  Also, it enhances how you feel about yourself, about other people and about the world in which you participate.  The better you feel, the better you do, and the more you are rewarded in financial and emotional terms.

Often, value can be added at a minor expense.  Sometimes, a creative approach can result in more value and lower cost to you and your customers. A good percentage of the millions of issued patents are examples of greater value and less cost.  Breakthrough thinkers like Leonardo da Vinci, Thomas Edison, Alfred Einstein, Alexander Graham Bell, Guglielmo Marconi and other inventors developed the "next new thing" by seeing something the rest did not see, or they made something completely different from what had been there before. 

Let’s look at a classic example of adding value.  In the Gospel according to John, at a wedding at Cana in Galilee, Jesus turned water into wine.  What made Christ’s miracle so special is that a liquid of low value was converted into one of high value.  It is more remarkable to turn a low-cost resource into one that has value, than to increase the worth of an already valuable resource.  This may happen when the starting cost is low. For example, bakeries and concrete construction companies have very high gross profit margins because of the low cost of initial materials, namely water and flour, and water and sand, respectively.  Craft items are made with inexpensive materials; yet, they can be turned into items of high value when the artisan is skilled and creative.  

Some industries and companies may create significant incremental value for some items but not for others.  Television or music companies derive substantial profits from many relatively low-cost intellectual properties like sitcoms or songs.  However, the losing ones can result in losses that offset a good portion of the profits of the others.

In developing methods to produce income, you should favor areas in which you can use inexpensive resources and then add your own value.  You may come up with a novel method of combining resources or providing a new use for those resources.  This is preferable over the chancier venture of adding low value onto an already expensive resource such as that of retailing high-end jewelry or warehousing products with thin margins.  Inventories are often too costly to maintain.  You may get stuck with expensive goods on hand when marketplace preferences change. 

The same idea holds true for relationships between employer and employee.   As an employee, you should strive to offer unique value-added skills, or else you will diminish the value of your experience and background, making yourself easily replaceable.  The challenge for employers is to view their employees as profit centers and foster their value creation, sometimes by inspiring new and unique business practices instead of regimentation and standardization.  If an employee is truly providing value equal to their cost, then that resource for the employer is free.  The company must then seek a way to get those free human resources to interact so that the total value provided by the enterprise or group increases.

When you get your value act together, remember the orthodontist and communicate your value confidently so others may place faith in you and let you convey your value to them.

Please send me your letters about how your life has been impacted by people who have given significant value to you.  With your permission, I will include them in future columns.

About the author.

Frank Sisco is a CPA and Personal Financial Specialist, and author of many articles about personal finance and issues of life and money.   His firm, Financial Management Corporation, is located in Harrison, NY.  Frank makes his home with his wife and daughter in New Rochelle, NY.  He can be reached at 914.381.3737 or by email at ideasmoney@aol.com.  Visit his website at www.LifeAndMoney.com, which contains this and prior articles.