Selling value

Value added selling is one of several sales techniques that relies on building on the inherent value of a product or service. By its nature the value add technique is a more flexible and customized selling approach that requires input from a defined range of average customers. These customers will help the sales and marketing leaders to outline value positions that are likely to benefit the largest number of customers.

The value add may not be initially apparent in the sales overview and is often tied to up-selling or vertical selling within a specific market segment. The utility of the product or service, ease of integration into the customers business operations, or time saving benefits are just a few areas that may be exploited when focusing on value add.

One of the more recent examples of value-added selling is hybrid cars. These are cars that rely on a mix of gasoline power and electric power. The inherent value of the product is still the same. It moves a person from point A to point B. The value add can be seen in several different ways. The first is the obvious fuel savings. But there is also added value in less time spent at the gas station, and the cars pollute the air less than a normal combustion engine. The value add in this instance is determined by the customer, and not the company selling the car

Selling value is the number-one obstacle that salespeople face. It is challenging but not impossible. Big box superstores, category killers, and discounters of every stripe are attempting to re-define the concept of value by using the word value as a euphemism for cheap. A solution that fails to perform for a customer is lousy value, regardless of the price. To sell value, let’s begin with an understanding of value—what it is not and what it is.

Value is not bloated, feature-rich products. Value is not layers of services that a company offers. Value is not a cheap price. Price is a product feature—like size, color, packaging options, etc. Why allow yourself to have a sale derailed over a product feature when the real issue is value? This reminds me of the famous Mark Twain quote, “Never argue with a fool, onlookers may not be able to tell the difference.” Salespeople that allow themselves to be sucked into a price debate think no differently from the person who raises the price issue.

Value is an outcome, the result of your solution. Value is return on investment, yield, or the impact of your solution on the customer’s world. Price affects this outcome no more or less than any other product feature. Salespeople lose the value argument when they get lost in the weeds of price justification. Like price-shoppers, they lose sight of the real purpose of a solution—to create something of value for the customer.

The value of something is determined by what customers sacrifice measured against the outcome of the solution. Sacrifice includes price and ownership costs. Outcome includes what the solution does and how it affects the customer. If the outcome of the decision is greater than the sacrifice, it is great value. If the sacrifice is greater than the outcome, it is lousy value. Price is a piece of the sacrifice, not the whole of it. At the heart of buying decisions, customers want great value, not just cheap prices. Salespeople, who find

themselves arguing over price versus selling their value, must heed the advice in Proverbs: “Answer not a fool according to his folly, lest you be like him yourself.”

When selling value, you can avoid bidding situations by establishing your value proposition early in the sales appointment with a discovery question about their intentions: “Is the lowest investment your only consideration, or is quality also important?” You want to hear the buyer say something like “Price is important, but we also want the quality to be good.”

The buyer may decide that value is a more important factor after all. Or the buyer may go ahead and buy from the competitor. But one thing the buyer won’t do is bid down your company and negatively affect your ability to move your product at a higher amount with other potential clients. You opted out of the bid-down situation, protected your margin structure, and made a powerful statement to the buyer about the value of your products. More important, you have made a powerful statement to yourself about the value of your products. Most salespeople “talk the talk” about the value of their products, but their actions betray their level of conviction when buyers squeeze them on price.

Sentimental value

Definition - What does Sentimental Value mean?Sentimental value is the value of an object that is derived from personal or emotional association rather than its material worth. It is the inflated opinion value based on what the sellers want. The fair market value differs from sentimental value, as both parties to a transaction must agree to its worth.

Divestopedia explains Sentimental ValueFair market value is the price that an interested and informed seller, but not a desperate seller, would be willing to accept in the open market and that an interested and informed buyer, but not a desperate buyer, would be willing to pay. This would be the price at which the property could change hands. However, sellers often attribute too much sentimental value to their businesses. These overpriced firms tend to sit on the market for a long time, which negatively impacts statistics and gives rise to misconceptions about the value of the firm.

Investor sentiment can also affect the bidding premiums of corporate acquisitions. There is a positive relationship between the amount of an acquisition premium and an investor’s sentiments. When the investor's sentiment is relatively high, the value of the premium is also high. The valuation by bidding firms is also relatively overpriced when the market sentiment is optimistic. On the other hand, when sentiment is low, the pattern reverses. Business owners seek to take advantage of the increasing investor confidence, hoping to maximize their firm’s value and exit with the highest selling price.

The root cause of many goodwill write-offs is overpayment by buyers at acquisition. In contrast, fair market value is what two parties with different interests decide something to be worth when neither

is under any compulsion to buy or sell. Though valuation should be an art and not an exact science, the sentimental attachment of the seller from blood, sweat, and tears put into the business need to be dismissed.

Sentimental Value is the inflated opinion of your homes value.

It is very hard to be objective about what to list your home at because of your emotional attachment to it.

Unfortunately many homes today are listed at sentimental value. This happens because many sellers list

their homes based on what they want to hear rather than what they need to here. The difference for some

agents can be the difference in getting your listing or not.

Unfortunately these overpriced homes sit on the market for months. These longer marketing times

negatively impact statistics making it appear that the market is slower than it truly is. A buyer in today's

market has time to compare competing homes and are in no hurry to buy. They may look at dozens of

homes and become very aware of what is priced right and what is not. Now as your home sits on the

market for months you soon realize that you need to lower your asking price. You lower it and a few

misconceptions could arise as a result. 1) The perception could be that there must be something wrong

with your home that it has not sold yet and now your lowering the price. 2) You lowered your price let's

wait it out to see if you continue to drop it lower.

Here is what could happen if you do sell your home at sentimental value. The buyer's lender will have

your home appraised and it comes in at market value which is lower than the sentimental value you

agreed upon. Two things could happen at this point 1) is the buyer will need to make up the difference

from what the home is sold for and what the appraiser appraised it at. 2) The other possible scenario is the

buyer could think that you tried to take advantage of him/her and walk away from the sale altogether.

Here are the benefits of having a pre-listing Appraisal completed by an Appraiser before listing with a

real estate sales expert.

The Appraiser will measure your home verifying it with city records this reduces your liability and brings

up any discrepancies which could negatively impact your homes value.

This floor plan can be used like new home builders in marketing your home on line and on flyers and

other marketing material.

The Appraisal can point out needed repairs, and additions prior to listing the home The pre-listing

appraisal can be used as a negotiating tool once you have a potential buyer. It gives you something

concrete to show your buyer. It's an independent third party opinion of your homes value, and not just

your sentimental value.

What is the depreciation value?

The asset is referred to as a depreciable asset. Depreciation is technically a method of allocation, not valuation even though it determines the value placed on the asset in the balance sheet.

Any business or income producing activity using tangible assets may incur costs related to those assets. If an asset is expected to produce a benefit in future periods, some of these costs must be deferred rather than treated as a current expense. The business then records depreciation expense in its financial reporting as the current period's allocation of such costs. This is usually done in a rational and systematic manner. Generally this involves four criteria:

cost of the asset,

expected salvage value, also known as residual value of the assets,

estimated useful life of the asset, and

a method of apportioning the cost over such life

Depreciation Methods- Straight Line, Double Declining, Units of ProductionThe concept of depreciation is involved when dealing with decreasing values of long term fixed assets over its useful life. Three key numbers of a long term fixed asset are original cost of the asset, expected salvage value (residual value) and estimated useful life.

The portion of value being used up during each accounting period is reported as depreciation expenses on the income statement. The remaining value of assets after depreciation will be reported on balance sheet as book value:Book Value = the original cost of asset – the accumulated depreciationSimilarly with inventory accounting, there are several ways to calculate depreciation:

Straight-line depreciation method is used by most of the firms. Under this method, equal amount of depreciation is allocated throughout the useful life of the asset.

Accelerated depreciation method is more realistic way to calculate depreciation. It speeds up the reorganization in a certain acceleration rate therefore more depreciation expenses are recognized in the early years of useful life. One popular accelerated method is declining balance method which applies a constant rate to the asset’s book value each year:

Annual Depreciation expense = Depreciation rate * Book Value at the beginning of the year

The most common rate used is double the straight-line rate. The method is referred as thedouble-declining balance method:

Please note that the residual value is not in the calculation for this method. Depreciation should end once the estimated residual value is reached. As a result of different ways of depreciation reporting, net income under straight-line method will be higher in the early years and then lower in the later years compared to accelerated methods.

Units of Production method expresses the useful life of the asset in terms of the total number of units to be produced by the asset. This is widely used in production industry when depreciating assets like machines.

Firms should try to match the depreciation expenses with the incomes that the asset generates in order to choose the more proper depreciation accounting method.

Fair value

Fair Market Value is the most probable price which a company or an asset would bring in a competitive and open market (in a fair sale). It is an estimate of the market value that an interested, knowledgeable but not desperate buyer is willing to pay an interested, knowledgeable but not desperate seller, assuming the company or asset is exposed on the open market for a reasonable period of time and the sale is paid using cash or cash equivalent. Willing buyers can include strategic buyers (buyers that are in the space already) or financial buyers (private equity). Given all these conditions, fair market value should be an accurate and fair valuation of the worth. Fair Value is a very similar concept to fair market value with minor differences. It is usually used in financial reporting or litigation matters.

fair value is a rational and unbiased estimate of the potential market price of a good, service, or asset. It takes into account such objective factors as:

acquisition/production/distribution costs, replacement costs, or costs of close substitutes

actual utility at a given level of development of social productive capability

supply vs. demand

and subjective factors such as

risk characteristics

cost of and return on capital

individually perceived utility

In accounting, fair value is used as a certainty of the market value of an asset (or liability) for which a market price cannot be determined (usually because there is no established market for the asset). Under US GAAP (FAS 157), fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This is used for assets whose carrying value is based on mark-to-marketvaluations; for assets carried at historical cost, the fair value of the asset is not used. One example of where fair value is

an issue is a college kitchen with a cost of $2 million which was built five years ago. If the owners wanted to put a fair value measurement on the kitchen it would be a subjective estimate because there is no active market for such items or items similar to this one. In another example, if ABC Corporation purchased a two-acre tract of land in 1980 for $1 million, then a historical-cost financial statement would still record the land at $1 million on ABC’s balance sheet. If XYZ purchased a similar two-acre tract of land in 2005 for $2 million, then XYZ would report an asset of $2 million on its balance sheet. Even if the two pieces of land were virtually identical, ABC would report an asset with one-half the value of XYZ’s land; historical cost is unable to identify that the two items are similar. This problem is compounded when numerous assets and liabilities are reported at historical cost, leading to a balance sheet that may be greatly undervalued. If, however, ABC and XYZ reported financial information using fair-value accounting, then both would report an asset of $2 million. The fair-value balance sheet provides information for investors who are interested in the current value of assets and liabilities, not the historical cost.

History fair value

The practice of mark to market as an accounting practice first developed among traders on futures exchanges during the 20th century. It was not until the 1980s that the practice spread to major banks and corporations, and beginning during the 1990s, mark-to-market accounting began to result in scandals.

To understand the original practice, consider that a futures trader, when beginning an account (or "position"), deposits money, termed a "margin", with the exchange. This is intended to protect the exchange against loss. At the end of every trading day, the contract is marked to its present market value. If the trader is on the winning side of a deal, his contract has increased in value that day, and the exchange pays this profit into his account. On the other hand, if the market price of his contract has decreased, the exchange charges his account that holds the deposited margin. If the balance of this account becomes less than the deposit required to maintain the account, the trader must immediately pay additional margin into the account in order to maintain the account (a "margin call"). (TheChicago Mercantile Exchange, doing even more, marks positions to market twice a day, at 10:00 am and 2:00 pm).[4]

Over-the-counter (OTC) derivatives on the other hand are formula-based financial contracts between buyers and sellers, and are not traded on exchanges, so their market prices are not established by any active, regulated market trading. Market values are, therefore, not objectively determined or available readily (purchasers of derivative contracts are typically furnished with computer programs which compute market values based upon data input from the active markets and the provided formulas). During their early development, OTC derivatives such as interest rate swaps were not

marked to market frequently. Deals were monitored on a quarterly or annual basis, when gains or losses would be acknowledged or payments exchanged.

As the practice of marking to market became more used by corporations and banks, some of them seem to have discovered that this was a tempting way to commitaccounting fraud, especially when the market price could not be determined objectively (because there was no real day-to-day market available or the asset value was derived from other traded commodities, such as crude oil futures), so assets were being "marked to model" in a hypothetical or synthetic manner using estimated valuations derived from financial modeling, and sometimes marked in a manipulative manner to achieve spurious valuations. The most infamous use of mark-to-market in this way was the Enron scandal.

After the Enron scandal, changes were made to the mark to market method by the Sarbanes–Oxley Act during 2002. The Act affected mark to market by forcing companies to implement stricter accounting standards. The stricter standards included more explicit financial reporting, stronger internal controls to prevent and identify fraud, and auditor independence. In addition, the Public Company Accounting Oversight Board (PCAOB) was created by the Securities and Exchange Commission (SEC) for the purpose of overseeing audits. The Sarbanes-Oxley Act also implemented harsher penalties for fraud, such as enhanced prison sentences and fines for committing fraud. Although the law was created to restore investor confidence, the cost of implementing the regulations caused many companies to avoid registering on stock exchanges in the United States. [5]

Internal Revenue Code Section 475 contains the mark to market accounting method rule for taxation. Section 475 provides that qualified securities dealers who elect mark to market treatment shall recognize gain or loss as if the property were sold for its fair market value on the last business day of the year, and any gain or loss shall be taken into account for that year. The section also provides that dealers in commodities can elect mark to market treatment for any commodity (or their derivatives) which is actively traded (i.e., for which there is an established financial market that provides a reasonable basis to determine fair market value by disseminating price quotes from broker/dealers or actual prices from recent transactions)