Richard A. Lindsey, CPA

Lindsey & Waldo, LLC – Certified Public Accountants

  • Sep 1

    What is a champion? By definition, it’s someone who excels above all others. Generally, it refers to a world class athlete, but it could just as easily apply to a top businessperson. Nancy Holland Morgan, a two time Olympic skier, has identified seven traits that can help us understand how we too can get to the top of our game and become champions.

    You have to really like what you are doing. If you don’t have a love of the activity, an enthusiasm that turns into a burning, white-hot desire, then it may be time to sit down and reassess your life’s interest. Without it, you will not have the passion necessary to sustain the drive. Without passion, none of the other traits will even matter.

    Achieving success invariably means having to learn new techniques, master new skills, develop new strengths, or obtain new knowledge. But more often than not, as we learn new skills and techniques, we don’t get it right the first time. We have to practice. Repetition, practice, review, effort, feedback, all go into learning the fundamentals. Commitment to learning is an absolute necessity for improvement in any activity.

    Combine your desire with commitment to training, and you begin to formulate a thoughtful plan to improve your performance. But, all the desire and commitment in the world won’t do you any good unless you have a goal. Champions set goals based on their strengths and weaknesses. Their plans revolve around reaching new thresholds based on increasing their strengths and overcoming their weaknesses. Champions know that to compete seriously for their personal best, they must surrender themselves to the goal.

    The first three traits prepare us for the fourth: tenacity. Life is a series of tests; we have to pass each one to go on to the next. As we move higher up the mastery scale, we take the chance of falling harder and longer. The falls are always painful. But, we must learn to get up after each fall and continue onward.

    No one today makes it to the top alone. All champions surround themselves with a support team. The strength of others is crucial to achieving the goal of championship status. Your support team may be only your closest family members, it may be a friendship circle, or it may consist of a paid staff of advisors. Your team’s job is to keep you in the right attitude as you gain altitude.

    Do something every day that scares you just a little — not something life threatening, but something that causes you enough discomfort that you will become accustomed to pushing the envelope of your performance. Get to love your zone of discomfort. It means that we are in an awkward phase of learning a new skill or strategy to help us achieve a higher level of performance. Some people seem to move in and out of the discomfort zone more easily. This is generally either because they have more experience living in the zone of discomfort or they have learned to fake it better than others!

    People like to be around those who have an aura of self-confidence and positive self-esteem. Self-confidence means you believe in the potential of achieving your goals. High self-esteem means you are satisfied with your talents and are able to recognize and appreciate the talents of others. This is not about being arrogant, but rather a more humble expression that you are comfortable with yourself, your accomplishments, and your talents.

    Being a champion starts and ends from within. To achieve success, you must start with a strong desire and end with the courage to maintain positive self-esteem and confidence in your ability. But in between is where the real work takes place. Championship status takes every bit of inner strength and external leveraging you can muster. With hard work, the rewards will be those of a champion.

  • Jul 21

    Many Americans appear to be living one big expense away from disaster. A 2014 Federal Reserve poll discovered the startling fact that almost half of all U.S. households could not come up with $400 to cover an emergency expense. They would need to sell something, or borrow cash, to do so.

    If you find yourself belonging to that category, then I have some ideas (11 of them, in fact) I think will help. In my experience, if you want to get out of a hole, you study the behavior of those who have already made it out. And you do everything you can to copy that behavior.

    Yes, some people have been fortunate enough to inherit wealth, etc. But many, MANY more of those who have wealth came about it in a different way.

    Now, so that YOU do not find yourself in the unfortunate place of not being able to scrape up $400 in an emergency … read this now.

    Becoming a household that will be able to ride through instability and uncertainty is only going to become MORE important in future years, not less. So, that being the case, here is a portrait of those who are able to achieve this status.

    You’ll notice that these are just as significantly about your mindset as you relate to your finances, as about your behaviors.

    Here’s what the Financially Secure look like …

    1) He always spends less than he earns. In fact, his mantra is that over the long run, you’re better off if you strive to be anonymously rich rather than deceptively poor.

    2) She knows that patience is truth. The odds are you won’t become a millionaire overnight. If you’re like her, your security will be accumulated gradually by diligently saving your money over multiple decades.

    3) He pays off his credit cards in full every month. He’s smart enough to understand that if he can’t afford to pay cash for something, then he can’t afford it.

    4) She realized early on that money does not buy happiness. If you’re looking for financial joy, you need to focus on attaining financial freedom.

    5) He understands that money is like a toddler; it is incapable of managing itself. After all, you can’t expect your money to grow and mature as it should without some form of credible money management.

    6) She’s a big believer in paying yourself first. It’s an essential tenet of personal finance and a great way to build your savings and instill financial discipline.

    7) She also knows that the few millionaires that reached that milestone without a plan got there only because of dumb luck. It’s not enough to simply “declare” to the universe that you want to be financially free. This is not a “Secret”.

    8) When it came time to set his savings goals, he wasn’t afraid to think big. Financial success demands that you have a vision that is significantly larger than you can currently deliver upon.

    9) He realizes that stuff happens, and that’s why you’re a fool if you don’t insure yourself against risk. Remember that the potential for bankruptcy is always just around the corner, and can be triggered from multiple sources: the death of the family’s key breadwinner, divorce, or disability that leads to a loss of work.

    10) She understands that time is an ally of the young. She was fortunate (and smart) enough to begin saving in her twenties, so she could take maximum advantage of the power of compounding interest on her nest egg.

    11) He’s not impressed that you drive an over-priced luxury car and live in a McMansion that’s two sizes too big for your family of four. Little about external “signals” of wealth actually matter to him.

    And a little bonus, if you will: She doesn’t pay taxes which could have been avoided with a simple phone call to her tax professional. She plans ahead, before tax time.

    “You cannot control what happens to you, but you can control your attitude toward what happens to you, and in that, you will be mastering change rather than allowing it to master you.” – Brian Tracy

  • May 24

    They played baseball together for ten years, and it happened so often, Franklin P. Adams, a New York Evening Mail columnist, wrote an eight-line poem about it. Originally published under the title “That Double Play Again,” it is better known as “Baseball’s Sad Lexicon,” or simply as “Tinkers to Evers to Chance.”

    These are the saddest of all possible words:
    “Tinkers to Evers to Chance.”
    Trio of bear cubs, and fleeter than birds,
    Tinker and Evers and Chance.
    Ruthlessly picking our gonfalon bubble,
    Making a Giant hit into a double—
    Words that are heavy with nothing but trouble:
    “Tinkers to Evers to Chance.”

    A little background: Back when the Chicago Cubs were a dynasty they won the National League pennants in 1906, ’07, ’08, and ’10 and the World Series in 1907 and ’08. Anchoring their infield were shortstop Joe Tinker, second baseman Johnny Evers, and first baseman Frank Chance -the best
    double play combination of the day.

    Adams considered the poem a throwaway when he wrote it. He simply wanted to get out to the ballpark and watch the game. But those three may still be the best known Cubs of all time.

    But, it didn’t happen by chance. (Did you see what I did there?) It happened by teamwork. It happened because they practiced. It happened because Tinkers and Evers and Chance developed a special relationship with one another unlike most others. The same is true if you’re trying to grow your business by word-of-mouth. You can’t expect people to shout your praises and send you referrals just because you showed up at the ballpark. It takes a relationship to make it work. Referral relationships work just like other relationships work.

    Think about the relationships you have with your neighbors. How willing would they be to help you out if your car broke down? Depending on your relationship, they might each respond differently. One might outright refuse to help. Another might share the name of his favorite mechanic. Another might be willing to take you or pick you up at the garage. Still another might insist on fixing it for you at no cost. Each of your neighbors may display a different willingness to help. And naturally, your willingness to help them would probably differ as well. Even your requests for help would be dependent on your history with each of them.

    Great referrals don’t happen just because you ask. At some level of consciousness, people who are good salespeople know this. Yes, sometimes, just asking for referrals will work, but more often, asking someone with whom you haven’t yet developed a relationship, may sour them forever.

    Like a great double play combination, it may look easy, but it takes a lot of work behind the scenes to make it happen. Getting ideal referrals with strong introductions from influential people involves planning, preparation, and practice. It involves developing that special relationship.

  • Apr 27

    In business, doing what others don’t do can often give you an edge. It can position you head and shoulders above your competition. It helps you stand out in a positive way, and when you do, people are attracted to you and your business, and your success grows stronger, deeper, and more durable.

    Asking for feedback is a simple way to gather information for improving our businesses, but many of us never take the time to ask. We get so wrapped up in the day-to-day running of the business that we fail to pause and ask people, “How are we doing?” Others are simply intimidated by the process – and afraid of what they’ll hear.

    According to the book The 29% Solution by Ivan Misner and Michelle R. Donovan there are five main reasons why we don’t ask for feedback: (1) we’re afraid the response will be negative; (2) we don’t know who to ask; (3) we don’t know when to ask; (4) we don’t know how to ask; (5) we don’t want to take up other people’s time. With all these objections, the thought of asking for feedback can give us heartburn, but it’s worth the pain; the potential for growth can be tremendous.

    Whether positive or negative, feedback should be considered constructive, because it helps our business develop new products, improve existing services, and sometimes adopt a whole new approach.

    Fear of a negative response may be what keeps many of us from asking for feedback. Nobody is eager to be criticized. But, as difficult as it to receive, negative feedback is actually a gift. It’s a reality check; it reminds us that no matter how good we are, we can always improve. It’s also a reminder that we can never make everyone happy. If you’re willing to ask for feedback, you’re going to get some negative feedback along the way. It’s your attitude toward it that will turn that negative feedback into an opportunity. Don’t ask for feedback unless you’re ready to hear it – and respond to it constructively.

    Whom should you ask for feedback? One answer is everybody. Ask your coworkers, supervisors, subordinates, partners, customers.

    When is the best time to ask for feedback? That depends. A professional development trainer might ask for feedback several times. During a session, so it can be tailored, the end of a session, and three or four months afterwards. She’ll ask different questions at different times. Someone selling a product might need to give the customer time to use it, or might not. Someone selling professional services might want to ask shortly after the services have been delivered.

    What if you don’t know how to ask for feedback? The easiest, and most logical, way is make it part of your sales process. Many companies use a questionnaire; some hand it out upon completion of the assignment, some e-mail it afterward, and some mail it as a follow-up in a few weeks. How you choose to do it depends on your customer base.

    The last reservation that a lot of us have is that we are reluctant to take someone else’s time by asking for feedback. What a cop-out. Adults have the option of saying no. It’s our responsibility to ask. Increase the likelihood that you’ll get useful feedback by making the request simple and timely. If it’s too complicated, or if you set a hurry-up deadline, your requests may end up in the circular file. Make the deadline too far off, and people will set it aside and forget it.

    I dare you – do something few others do. Stand out from the crowd. Ask for feedback. And be ready to turn it into opportunities for your business.

  • Dec 9

    Shhhh! I have a secret for you. I’m going to share it with you today, but you have to promise to keep it under wraps.

    Applied to your business correctly, this one “secret” could transform your business. If you have the faith to apply this secret correctly, it could be worth millions. Your life could change from struggling to keep the wolves at bay to successful entrepreneur nearly overnight.

    Okay, here’s your tip of the day. Well, it’s not so much a tip of the day, as it is the tip of the week, or maybe the tip of the year…

    Change your prices. That’s all you have to do. I have seen more people make more money simply by raising their prices than any other advice I’ve given them.

    Nearly every business person grossly underestimates the elasticity of price, and neglects the fraction of their customers/clients/patients who will cheerfully buy a higher priced premium option of what they sell if only it were offered. They leave a lot of money on the table by not offering a leather bound version of the paper bound product; a red door to walk through in the back instead of the blue door in the front.

    Marketing guru Dan Kennedy talks of the time he lived in Phoenix. At the time, there was a very popular nightclub in Phoenix that had a big, long rope line in the front where you could buy a card for $500 a year that allowed you to stand in the rope line in the back. Well, you say, who’s gonna buy a card for that? A lot of people did, based on the length of the line in the back. In fact, some nights the rope line in the back was longer than the rope line in the front.

    Not everyone will, but there are plenty of customers who will select a premium option. Price is very elastic. Most business people don’t understand just how elastic price is because of the manner in which they set their prices. Here’s what most people do, and I’d be willing to bet you’ve done the same thing. They look around at what everybody else in their industry is charging and set their price right in the middle. They think they’re being “competitive.” If they’re really daring, they try to be a little higher than the average; or if they think they can buy volume, maybe they set it a little lower than average.

    Alas, there are also those poor souls who attempt to price themselves at the bottom of the heap in order to proclaim they have the lowest prices on the block, in their town, their region, or whatever. It is a dangerous strategy because, as I’ve warned you time and again, there is always someone willing to go out of business faster than you are.

    Here’s the power of transaction size. Granted, it’s a very simple example, but one you might ought to post on your wall where you can see it every day. How do you get to a million dollars in sales in your business? You can get there with one transaction, if you can sell someone something for a million bucks. If you’re going to sell something for $100 it’s going to take you 10,000 sales to make it. Making a million dollar sale is not 10,000 times harder than making a $100 sale. It just isn’t. Now, I’m not saying Starbucks could figure out how to make a million dollar sale, but they did figure out how to sell a cup of coffee for $8. They didn’t do that by getting a committee together in a conference room and saying, “Let’s see, Denny’s sells their coffee for $0.55 and Dunkin Donuts is $0.72, so, let’s be courageous and go for $0.99.” That’s NOT how they got there.

    You’re familiar with Omaha Steaks, right? They come in a Styrofoam ice chest delivered to your door. They have good steaks. But, you know they also have hamburgers. And they have hot dogs. All of them delivered right to your door. So, Omaha steaks are, let’s say, double or triple the price of the best beef being sold in the supermarket or butcher shop. Maybe they’re five times as much as Sam’s or Costco. Yes, they do deliver, but a steak is a steak is a steak. Right?

    Wrong! Now, there’s Allen Brothers. Ever try theirs? I hear they are wonderful. It’s twice the price of Omaha. These guys are in the same business, catalogue selling of steaks, hamburgers, hot dogs, and they have the gall to charge twice as much as Omaha! And people are switching like there’s no tomorrow.

    I recently read about a cosmetic surgeon, Doctor Fairfield, who lives in the Philadelphia area. He does seminars to bring in new patients. At the seminar he offers a $25,000 membership in the practice for the patient to have all the cosmetic procedures they want or need for three years. So you want to come have a Botox shot every day? You can; $25,000 membership fee up front. Five people in a room of 150 chose this option, and three of them had no prior relationship with him. They showed up based on a newspaper ad and plunked down $25,000. That’s price elasticity. It’s everywhere. I promise you, most people don’t understand it and most people underestimate it.

  • Nov 22

    Gwen Jorgensen recently became the first U.S. woman to win Olympic gold in the triathlon, crossing the finish line with a time of 1:56:16.

    Jorgensen earned a master’s degree in accounting at the University of Wisconsin-Madison, passed the CPA, and took a position as a tax accountant with the EY corporate tax group. She didn’t even take up triathlon until after college. In college, Jorgensen was a runner and swimmer, and was approached by USA Triathlon looking for college athletes they thought would be successful in the sport. She initially turned USA Triathlon down, but they convinced her to try the sport as a hobby while working for EY.

    With the help of one of the tax partners at EY, Jorgensen was able to work a flexible schedule to accommodate travel for competitions and time to train for the 2012 Olympics in London. After the London Olympics, she decided to put her accounting career on hold in order to devote her time to training.

    Looks like it was time well spent. It’s not every day a tax accountant from Wisconsin wins a gold medal in the Olympics.

  • Nov 11

    Steve Jobs was the co-founder, chairman, and chief executive officer of Apple, Inc. This is the fifth anniversary of his death. These inspirational words are often referred to as his last.

    I have come to the pinnacle of success in business.

    In the eyes of others, my life has been the symbol of success.

    However, apart from work, I have little joy. Finally, my wealth is simply a fact to which I am accustomed.

    At this time, lying on the hospital bed and remembering all my life, I realize that all the accolades and riches of which I was once so proud, have become insignificant with my imminent death.

    In the dark, when I look at green lights, of the equipment for artificial respiration and feel the buzz of their mechanical sounds, I can feel the breath of my approaching death looming over me.

    Only now, do I understand that once you accumulate enough money for the rest of your life, you have to pursue objectives that are not related to wealth.

    It should be something more important:

    For example, stories of love, art, dreams of my childhood.

    No, stop pursuing wealth, it can only make a person into a twisted being, just like me.

    God has made us one way, we can feel the love in the heart of each of us, and not illusions built by fame or money, like I made in my life, I cannot take them with me.

    I can only take with me the memories that were strengthened by love.

    This is the true wealth that will follow you; will accompany you, he will give strength and light to go ahead.

    Love can travel thousands of miles and so life has no limits. Move to where you want to go. Strive to reach the goals you want to achieve. Everything is in your heart and in your hands.

    What is the world’s most expensive bed? The hospital bed.

    You, if you have money, you can hire someone to drive your car, but you cannot hire someone to take your illness that is killing you.

    Material things lost can be found. But one thing you can never find when you lose: life.

    Whatever stage of life where we are right now, at the end we will have to face the day when the curtain falls.

    Please treasure your family love, love for your spouse, love for your friends…

    Treat everyone well and stay friendly with your neighbors.

  • Sep 2

    I doubt few of us can forget where we were 15 years ago when the attacks began on the morning of September 11, 2001. That horrible, tragic day is forever etched in our memories.

    Patriot Day is observed in remembrance of the nearly 3,000 people who lost their lives that day. On that day, two hijacked airplanes were deliberately crashed into the twin towers of the World Trade Center in New York City. A third hijacked airplane crashed into the Pentagon and a fourth crashed into a Pennsylvania field before hitting its suspected target, the White House.

    Like the unprovoked attack on Pearl Harbor that brought us into World War II, the 9-11 attacks ushered us into a new war… the war on terrorism. It also touched and changed the lives of each and every American forever.

    In the days, weeks and months following 9-11, the U.S. was bathed in American flags as citizens mourned the incredible losses and stood shoulder-to-shoulder against terrorism. Sadly, many of the flags have disappeared. Our patriotism has pulled us through some tough times and it shouldn’t take another attack to galvanize our solidarity. Together we can prevail over terrorism of all kinds.

  • Jun 24

    May 7, 2016 University of South Alabama baseball legend Steve Kittrell’s #3 was retired in an official ceremony. His was only the third number ever retired by the Jaguar baseball program, joining former head coach Eddie Stanky and All-American Luis Gonzalez.

    During his 29 seasons, Coach Kittrell amassed nearly 1,100 victories, a number that, to this day, keeps him in the top 50 of the all-time NCAA victory list and among the top 40 for Division 1.

     

    Sitting in the stands at Stanky Field, listening to all the accolades being bestowed on Steve Kittrell, I remembered an email I received at the middle of tax season and the beginning of college)baseball season. The email didn’t attribute an author, and I wasn’t familiar with the subject of the story so I checked it out before passing it on to you. As far as I can tell the original story was written by baseball consultant Chris Sperry for Baseball Life, but don’t let that keep you non-baseball fans from reading on. Baseball was simply the context, not the story.

    In Nashville, Tennessee, during the first week of January, 1996, more than 4,000 baseball coaches descended upon the Opryland Hotel for the 52nd annual ABCA convention.

    During registration I heard more veteran coach’s conversations returning to the speaker lineup. One name, in particular, kept resurfacing, always with the same sentiment – “John Scolinos is here? Oh man, worth every penny of my airfare.”

    At the time, Coach Scolinos was 78 years old and five years retired from a college coaching career that began in 1948. He shuffled to the stage to an impressive standing ovation, wearing dark polyester pants, a light blue shirt, and a string around his neck from which hung home plate – a full-sized, stark white home plate. Seriously I wondered, “who in the hell is this guy?”

    After speaking for 25 minutes, not once mentioning the prop hanging around his neck, Coach Scolinos appeared to notice the snickering among some of the coaches. Even those who knew Coach Scolinos had to wonder exactly where he was going with this, or if he had simply forgotten about home plate since he’d gotten on stage.

    Then, finally… “You’re probably all wondering why I’m wearing home plate around my neck. Or maybe you think I escaped from Camarillo State Hospital,” he said, his voice growing irascible. I laughed along with the others, acknowledging the possibility. “No,” he continued, “I may be old, but I’m not crazy. The reason I stand before you today is to share with you baseball people what I’ve learned in my life, what I’ve learned about home plate in my 78 years.”

    Several hands went up when Scolinos asked how many Little League coaches were in the room. “You know how wide home plate is in Little League?” After a pause, someone offered, “Seventeen inches,” more question than answer.

    “That’s right,” he said. “How about in Babe Ruth? Any Babe Ruth coaches in the house?”

    Another long pause.

    “Seventeen inches?” came a guess from another reluctant coach.

    “That’s right,” said Scolinos. “Now, how many high school coaches do we have in the room?” Hundreds of hands shot up, as the pattern begin to appear. “How wide is home plate in high school baseball?”

    “Seventeen inches,” they said, sounding more confident.

    “You’re right!” Scolinos barked. “And you college coaches, how wide is home plate in college?”

    “Seventeen inches!” we said, in unison.

    “Any minor league coaches here? How wide is home plate in pro ball?”

    “Seventeen inches!”

    “Right! And in the major leagues, how wide is home plate in the major leagues?”

    “Seventeen inches!”

    “Seventeen inches!” He confirmed, his voice bellowing off the walls. “And what do they do with a big-league pitcher who can’t throw the ball over seventeen inches?” Pause. “They send him to Pocatello!” He hollered, drawing raucous laughter. “What they don’t do is this: they don’t say, “Ah, that’s okay, Jimmy. You can’t hit a seventeen inch target? We’ll make it eighteen inches, or nineteen inches. We’ll make it twenty inches so you can have a better chance of hitting it. You can’t hit that, let us know so we can make it wider still, say twenty-five inches.”

    Pause. “Coaches…” Pause.

    “… What do we do if our best player shows up late to practice? When our team rules forbid facial hair and a guy shows up unshaven? What if he gets caught drinking? Do we hold him accountable? Or do we change the rules to fit him, do we widen home plate?

    The chuckles gradually faded as 4,000 coaches grew quiet, the fog lifting as the old coach’s message began to unfold. He turned the plate toward himself and, using a Sharpie, began to draw something. When he turned to toward the crowd, point up, a house was revealed, complete with a freshly drawn door and two windows.

    “This is the problem in our homes today, with our marriages, with the way we parent our kids. With our discipline. We don’t teach accountability to our kids, and there’s no consequence for failing to meet standards. We widen the plate!”

    Pause. Then, to the point at the top of the house he added a small American flag.

    “This is the problem in our schools today. The quality of our education is going downhill fast and teachers have been stripped of the tools they need to be successful and to educate and discipline our young people. We are allowing others to widen home plate! Where is that getting us?”

    Silence. He replaced the flag with a cross.

    “And this is the problem in the church, where powerful people in positions of authority have taken advantage of young children, only to have such an atrocity swept under the rug for years. Our church leaders are widening home plate!”

    I was amazed. At a baseball convention where I expected to learn something about curveballs and bunting and how to run better practices, I learned something far more valuable. From an old man with home plate strung around his neck, I’ve learned something about life, about myself, about my own weaknesses and about my responsibilities as a leader. I had to hold myself and others accountable to that which I knew to be right, lest our families, our faith, and our society continue down an undesirable path.

    “If I am lucky,” Coach Scolinos concluded, “you will remember one thing from this old coach today. It is this: if we fail to hold ourselves to a higher standard, a standard of what we know to be right; if we fail to hold our spouses and our children to the same standards, if we are unwilling or unable to provide a consequence when they do not meet the standards; and if our schools and churches and our government fail to hold themselves accountable to those they serve, there is but one thing to look forward to…” With that, he held home plate in front of his chest, turned it around, and revealed its dark backside. “… Dark days ahead.”

     

    His message was clear: “Coaches, keep your players – no matter how good they are – your own children, and most of all, keep yourself at seventeen inches.

  • Mar 4

    Many years ago, Folgers® coffee scored big with a series of ads taking the viewer inside various gourmet restaurants while an announcer whispered “we’re here at such-and-such snooty restaurant, where we’ve secretly replaced the fine coffee they usually serve with Folgers® crystals. Let’s see if anyone can tell the difference.” And they interviewed diners, who expressed shock, and I’m sure no small amount of embarrassment, when they discovered how much they liked the cheap Folgers® Instant instead of the “gourmet” brand they expected. (This was way before Starbucks® elevated our palates and made us all coffee connoisseurs.)

    A few years ago, Walmart® shamelessly ripped off paid homage to Folgers® with their own ad promoting-believe it or not-Walmart® steaks. “We’re here at the famous Golden Ox Steakhouse in Kansas City, where we switched their steak, with Walmart’s choice premium steak…”

    Now, I can’t vouch for the quality of Walmart’s meats, but let me make two points about Walmart® steaks, with lessons for your own business.

    There is a placebo effect. Diners who gear up for a big night out at a fine steakhouse are primed for a great meal. They expect choice ingredients everywhere, and select service from a well-trained staff. And they’ll probably be pretty happy, even if the experience isn’t “objectively” all that great.

    This effect has been proven time and time again. Researchers at Stanford University used MRIs to study Caltech grad students’ brains as they swallowed five red wines priced at $5, $10, $35, $45, and $90 per bottle. They found that as the price of the wine rose, so did the activity in the subjects’ medial orbitofrontal cortices. (Apparently this is the part of the brain that experiences pleasure.) The “catch,” of course, is that the subjects didn’t drink five different wines-they drank three. The wine presented as costing $45 per bottle was really the one costing $5-and the wine presented as costing $90 per bottle really cost just $10.

    The placebo effect won’t work just anywhere. Diners have to really expect a great meal for it to work. Nobody who shows up at the squat-and-gobble all you can eat buffet expects a world-class steak. They are just happy they don’t see marks from where the jockey was hitting it.

    There is also a Walmart® effect. I understand Walmart® steaks are actually perfectly fine beef. They’re USDA “choice,” which is the same cut you find it mid-priced steakhouses like Outback® or Longhorn®. (The top 3% of beef, with the most marbling is graded “prime.” That’s the stuff you’ll find “dry-aged” at elite steakhouses, often drenched with butter, and sometimes served with a side of Lipitor®. The next 55%, with “slightly abundant marbling,” is graded “choice.” That’s the stuff you grill at home, and it’s really pretty good. Finally, there’s USDA “select,” which usually winds up ground into hamburgers.)

    The problem, of course, is that Walmart® has positioned itself as being the home of discount prices (cheap). And nobody associates “cheap” with “good.” Nobody expects good steaks at Walmart®. So how does Walmart® get around our prejudice?

    Well, here they resort to a classic “dramatic demonstration.” Showing happy diners enjoying Walmart® steaks is a lot like H&R Block® ads showing a stage full of happy clients stepping up to claim surprise refunds. It’s just like “Vince from ShamWow®” telling the camera guy to follow him as his miracle chamois soaks up a spill.

    The downside of this approach is that while Walmart® tells us their steaks are “surprisingly good,” at least some of us still focus on the “surprise” more than the “good.”

    To sum up: 1) the “placebo effect” actually lets us sell downscale stuff at an upscale price; however, 2) the “Walmart® effect” actually keeps us from selling upscale stuff in the downscale environment.

    Still skeptical? Ask yourself this-would you have nearly as hard a time believing steaks from Target® are good?

    The bottom line for your business is this: if you position yourself as a premium provider, clients may not even realize if you occasionally drop the ball. But, if you position yourself as a discounter-if you give yourself a reputation for being cheap-clients will have a hard time believing you’re good!

    You probably didn’t go into business to be the Walmart® of your profession. Let Walmart’s challenge in selling steaks remind you why you should position yourself as high up the food chain as you can!