Net Present Value Of A Smile

By: Wojciech Kic

Making money is what drives many people in the business world.The character of a salesman and the strength of his or her desire to succeed determine the difference between success and failure. Lets consider some examples.

John was a real estate broker. His small but successful company carved out a market niche in a stable $200,000 average house neighborhood. John knew all about the neighborhood. He knew when every house was built, what its current condition was and who its occupants were. He knew why his clients sold and purchased houses. He sold houses quickly. Firmly established as a neighborhood real estate expert, he commanded a large share of local sales.

John was ready for progress. An opportunity presented itself when he was referred a listing for a $1,500,000 house in a different neighborhood.The listing appointment with the owner went very well.The owner was impressed by John’s knowledge of the market and he seemingly was able to overcome all listing objections. John asked for the business and the owner asked him to prepare the necessary listing documents.When leaving the house, the owner told John that she would call him the next day to set up a time to sign the listing agreement.

The next day John waited for a call from the owner. A prospect of a sales commission, even after customary brokerage splits, of $45,000 made the day very promising. But that call never came. John tried to call the owner of the house but to no avail.

Within a couple of weeks John noted that another real estate brokerage company was marketing the house for sale. Courageously, John called the owner of the house and asked: “I felt that I could do an excellent job for you. Could you tell me straight up why I did not get the listing?” “John,” she replied, “I can’t stand smokers and neither would the prospective buyers of my house.”

After hanging up John looked at the half-burned cigarette he lit up only a minute earlier. He put it out with disgust. And he realized that the loss of business was not due to his 10-year-old smoking habit. In fact it did not even matter how much he smoked before
at all. The loss of business was caused by the last, single, cigarette that made him look like a smoker during his listing appointment.

But at the prospect of a potential loss of $45,000 per cigarette he never smoked again.

The value of a negative individual behavioral trait is often overlooked in sales because it appears difficult to assess. But the value of each of those traits can be easily measured when it is compared against the total value of a lost opportunity.

In another example, lets say an advertising company has several accounts averaging $500,000 in annual billings. At an average life span of five years, each account is worth $2.5 million in lifetime billings.An advertising account is usually headed by an account executive. She better never be tardy. In a personal survey, I found that a typical client will discontinue a business relationship with a business provider if the person in charge of the account is late a total of three times for a client appointment.That makes the billing value of each tardy appearance at about $833,333.

Also, most customers don’t like grumpy business providers either. If the advertising account manager quits smiling, for whatever reason, at a client during occasional meetings, that account will go to a competitor as well. How often can you afford to go without a smile to your client? Many clients tell me “Not Often.” If the “Not Often” means maybe five times, each billing value of a smile is worth $500,000.

The compounded effect of negative behavior traits will prematurely end valuable business relationships. But negative behavioral traits can be eliminated, however, only if they are recognized and measured. For a business, it means a higher client retention rate. For a salesperson, it means a better understanding of the sales process.

Landlords have a lot to learn from the sales profession. In a one-year lease, there are at least 365 opportunities for a communication between the landlord and the tenant.The result of each communication has a compounding effect on the quality and the length of the leases. Thus, landlords must recognize that in their landlording effor t, there is no room for a bad day. Overcoming personal bad days is the landlord’s key to building a growing and valuable real estate portfolio.

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