Value > Payment > Cost: It’s the Law

There is a basic economic reality to business. Every great and successful business follows it.

Your business must follow it as well; or eventually perish.

It is the Law.

In "The Go-Giver" by Bob Burg and John David Mann, state the "The Law of Value" as:

"Your true worth is determined by how much more you give in value than you take in payment."

Value

Like beauty, value is in the eye of the beholder. 

Value is perceived.

It can include the raw cost of producing something… materials and labor. If that part is appreciated.

But unless someone wants what you are selling (think hockey or baseball cards), you cannot realize a payment equal to your perception of value. After all, it is their perception that matters.

So value includes the intangibles. How it makes you feel. The experience. A sense of belonging or caring. The soft stuff.

In many cases the soft stuff far exceeds the cost of producing it (pennies).

In order for someone to give you money for something, they must want it more than they want the money.

The bigger the gap, the more likely they will perceive value for payment to be good. The more likely others will buy what you have.

This is the desire, want and need.

Value >> Payment = Good

Payment

In commerce these days this is usually money. In older times you bartered: 4 chickens, a blanket and a bushel of potatoes for a cow (no idea how big a bushel is but is sound more old times).

Getting paid in business is good.

This is your income.

But it is not the entire picture.

Cost

How much does it cost you to produce the product or service you sold? (The thing that had value to someone and for which they gave you payment in return.)

This is where businesses can innovate. 

How much value can you produce for as little cost as possible? What can you add to your current offering to increase value?

In many cases the intangible value or soft stuff can cost you very little. You can increase the value with relatively little extra cost.

How much does it cost to smile? How much does it cost to take a little time and build a connection? You get it. 

Payment (income) – Cost = Profit

Profit is even better than revenue. You can have lots of revenue and still close your business if you don't have profits.

Profits allow you grow. They allow you to create more jobs for more people. Profits reward the business owner(s) for taking the risk and working hard. When you spend your profits other businesses benefit. It makes for a thriving economy. It is not dirty at all. It is good.

Profit is good!

The Big Thing!

If you focus first and foremost on delivering value, you are focused on the customer. By focusing on the customer first instead of the money, you will naturally add the intangible soft stuff. It becomes second nature.

If you are focused on the money first you will scrimp on the soft stuff. And people can smell it; the lack of caring.

The bigger the gap between value and cost, the more you can take in payment. 

The customer wins. They get far more in value they you take in payment.

Your business wins. You take far more in payment than it costs you to provide the product or service.

Everybody wins in a fair transaction. Beautiful.

Being a Go-Giver is not charity. It is a business methodology that works.

If you are not in business to turn a profit; get out now. A fool and their money are soon parted. 

Go-Givers are not fools either. It's the Law. Don't break it. 

The Law of Value.

By | 2017-04-03T11:35:07+00:00 October 10th, 2012|Categories: Business Strategy, Doug's Blog, Go-Giver Coach|

About the Author:

Doug Wagner is an entrepreneur, President and Co-founder of Sunwapta Solutions. Sunwapta's mission is to help businesses transform from surviving to thriving, sustainable growth. From strategy to implementation, this means marketing, sales, managing your brand and delivering consistent value. Get more clients and keep them.