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The Four Roads to Value for Your Practice
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The Four Roads to Value for Your Practice

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For reasons not the least bit interesting, I know a few things about lighting, and believe me, lamps can teach you a lot about living a better, more fulfilling life.

Okay, not really; it was just a bizarre coincidence.

My sister-in-law shares my interests in estate sales and not spending money, and she only goes to estate sales in the final hours of the last day, which is long after the ‘good’ stuff sold. This strategy accomplishes 3 important goals: it reduces choices, makes it less likely you’ll buy something you don’t need, and if you find something to buy, the price is usually only slightly above shoplifting.

Saturday I went to an estate sale because I needed a few cheap lamps for my son’s Teen Cave & Underground Lair. I spent $30 as follows: $17 on a lamp, $5 on a set of Time-Life books (Great Civilizations), and $3 on a wooden toy truck for my 2-year-old younger son.

This brought to my mind how important “value” is in our lives and how most people don’t understand that value is not price.

Knowing a little bit about lamps, I recognized an absolute steal of a deal, the Stiffel Ivory and Antique Brass Table Lamp. The lamp in question, sold new, is around $275. At $17, the price was a 90% discount off the retail price. Did I get a good bargain? Not necessarily.

1. Knowledge. I happen to know a lot about financial restructuring, lawyers, and lamps. That knowledge has value to others and myself. I know very little about dentistry, lawn mower repair, or where to find Sacramento’s best cheeseburger. If you have superior knowledge of the value of something in the marketplace, you have a distinct negotiation advantage (this is also how a pawn shop owner gets his own TV show). Superior knowledge, experience, and/or skills are valuable. Find yours and learn to precisely articulate them in 10 seconds, 20 seconds, and 60 seconds.

The toy truck was an impulse buy, but these little carved trucks will go for around $15-$25 on EBay. So at a minimum, I obtained an 80% discount off the retail price, not including shipping. Is this little truck worth $3? Maybe, maybe not.

2. Need. The basement needed a lamp. My toddler son certainly doesn’t need yet another toy truck. You may need advice on dealing with a client’s financial difficulties. If you’re 12 years old and/or generally have misplaced priorities, you might ‘need’ a pair of Air Jordans. What’s it worth to you to be happy in your work? What would you pay to solve your clients’ problems and keep them happy? When you can learn the difference between what you really need and everything else, you make better determinations of value. Learn the difference.

People who appreciate mid-20th century popular culture remember the old Time-Life Books mail order series. I snagged 6 of the “Great Civilizations” series books for $5. Absolute mint condition—nobody had opened them. These book series came out incessantly in the 1960s and 70s, and I enjoy collecting them.

3. Happiness. This should require no explanation. However, the trick is not to appreciate the value in what makes you happy. That’s obvious. However, do the things you do and buy really make you happy? The hard (i.e., important) part is to stop putting excessive value on things that don’t actually make you happy, just because others say they should. Do you drive an $80,000 Range Rover because it serves your needs for a vehicle and driving it makes you happy, or does it merely satisfy a need for pride, or envy, or just plain gluttony for status symbols? Stop it.

Driving home with my new treasures, I felt it was a good day. The sale had interesting things, and I snagged $300 worth of stuff for a mere $25! Suckers!

Then something occurred to me about the conversation I had with the woman running the estate sale.

She seemed to really enjoy her work and probably ran estate sales between shifts at the library. She took my $25 and put it into her leather cash/bank bag, which was stuffed with bills. I asked the her what would happen to the stuff they couldn’t sell (I had my eye on 3 boxes of mint condition LP records).

“The estate sold the property to a developer, and we are just going to leave whatever’s left for the contractor to haul off when they gut the place,” she replied.

So for the seller, my purchases were trash! They placed zero value on the items and pocketed $25. Did the estate get $25 of value in the transaction? They certainly think so! My $25 was gone forever!

4. Opportunity Cost. This is the hardest factor to quantify and also the most important when making value decisions. What is the cost to you for an important client to file bankruptcy? What does it cost you to remain stuck in a place that isn’t right for you? You pay a cost every day by avoiding changes you know you need to make. If you don’t change things, “things” will change you. So change things first.

While not all transactions involve an exchange of money (the price), all transactions are an exchange of value. In the city, people cart off just about anything left at the curb. Broken chairs, dead electronics, broken down lawn mowers, rusted fencing, even tree stumps. This is a value exchange—the homeowner received the value of somebody taking it off their hands.

Value is as subjective a concept as you can find. Value is entirely in the eye of the beholder, the receiver. Value is not price. What’s it worth to you? It can be anything. A lamp, a Corvette, a trip to wine country, a bottle of water. What’s the value of a bottle of water to a man stranded at sea? What is a Tesla worth to a blind man? What is the value of a dentist fixing your toothache?

When value you expect to receive exceeds the price, that’s a buying opportunity. When others value something of yours (products, knowledge, skills, talent), you have something to sell. Think about these 4 factors and look for a disconnect between the price of something and its value to you, or its value to others. These disconnects are where people make money, and also where people make poor spending decisions.

In most exchanges of value, the value received by your counter party is easy to calculate or perceive. When you sell a house, and the closing statement says $25,000 of the proceeds go to the seller, you made money, and the buyer received the house they wanted. Everybody’s happy.

But what about those situations where the counter party receives significantly more value than you do? What if your buyer flipped the house the next day for a $25,000 profit of his own? How would you feel then? We will discuss this conundrum next time.

Clay Westbrook on EmailClay Westbrook on LinkedinClay Westbrook on Twitter
Clay Westbrook
Clay Westbrook
Clay is a business restructuring and litigation consultant, former attorney, and author of Debt & Circuses: Protecting Business Owners from their Enemies, their Allies, and Themselves, which teaches how negotiation works in the new economy, shows how to manage the stress of financial problems, and chronicles many restructuring adventures. His consulting firm, Ascent, helps attorneys, CPAs and other professionals protect and defend clients in financial distress, contentious litigation, and complex negotiation.

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