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I am still reading through "The Personal MBA" by Josh Kaufman and came to the chapter on finance. In this chapter, he has a subsection on Value Capture.

In that he states: "Value Capture is the process of retaining some percentage of the value provided in every Transaction."

There are 2 approaches to Value Capture.

1. Maximization approach - attempt to capture as much value in each transaction as possible.

2. Minimization approach - capture as little valure as possible, as long as the business remains Sufficient.

 I think most people default to approach number 1. But there is a danger in that.

 Kaufman explains: "When something is a "good deal" customers tend to continue to patronize the business and spread the word to other potential customers. When a business tries to maximize revenue by "nickel-and-diming" their customers or trying to capture too much value, customers flee.

As long as you're brining in enough to keep doing what you're doing, there's no need to fight for every last penny. Create as much value as you possibly can, then capture enough of that value to make it worthwhile to keep operating."

Is there a lesson here for sellers? I think so. While a seller is not building a business, they are still selling a product (their home). And in order for any sale to take place their must be a customer willing to purchase their product.

Now obviously sellers are not worried about re-peat customers. Most of them just have 1 home to sell. But they do need to worry about the 1 customer, who still makes their purchasing decision based on whether the home they are buying has more value to them then their money. And customers do buy based on whether they perceive that they are getting a good deal or not. Trying to capture all of the value from a sale takes away value from the purchase, which in today's market, will cause a buyer to speed walk away from a deal, especially if they have a good buyer agent representing them.

I have heard it said that we judge ourselves based on our intentions and others based on their actions. Beware of a seller that will nickle and dime a buyer to death on the sell of their home, then expect a good deal on the next home they purchase.

 

www.nickmiller.biz

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