How to increase your financial value: 3rd V

We have been exploring how you can increase your financial value using the 3 V’s I introduced in my previous posts. The 3 V’s of ValueSpeaks is a value creation approach to building wealth. The first V refers to core values. The 2nd V is your value offering which involves identifying your skills. In this post, we will be exploring the 3rd V, financial value. We will start by exploring concepts of value in other to identify how to increase your financial value by leveraging the first 2 V’s.

Value is a concept I learned whilst studying Economics at university. There are several schools of thought and concepts to explore.

The classical economists argued that value comes from production while the neoclassical economists argued it came from ‘utility’ in other words exchange and consumption

Truong HongTringh (2018) Towards a paradigm on the value, Cogent economics & finance

If the classical economists were right, then the more we produce (hard work, time and effort spent e.tc) the more we will earn, right? Are the hardest workers in society the wealthiest? If ‘how to increase your financial value’ was hard work, then a good number of people will be wealthy. We know for a fact that the hardest workers in terms of physical labour are not the richest.

What about the neoclassical economist view that value comes from providing utility? This means that if you exchange something that is consumed then you are offering value. This is explained by the marginal utility theory.

Marginal utility theory

Marginal utility is the added satisfaction a consumer gets from consuming an additional unit of a product. This is further explained by the theory of diminishing marginal utility. Which states that the very first unit of a product consumed carries more satisfaction than subsequent units. There are different aspects and types of utility that can be explored and the theory can be interpreted in several ways. For instance, will you get more satisfaction from eating a second piece of cake than the first? In a similar vein, if you are working somewhere and doing the same duties for years, is the value you are offering diminishing? Will your employer benefit more from employing someone fresh who might approach your job with vigour?

The paradox of Value

Explaining how much value is given by the satisfaction derived from consuming more of a product does pose problems. One of the criticisms of the marginal utility theory is explained by the water-diamond paradox. We consume more water than diamonds, but diamonds are more valuable. Whilst we can survive without diamonds, we can’t survive without water. According to Economists, diamonds are valued more because consumers prioritize price by a product’s least value usage. For example, if we compare the value of water (least value usage) in a muddy gutter to even the smallest diamond, the diamond will appear more valuable. To explain this further, we can discard water quite easily but no one in their right minds will throw diamonds away will they?

All these points to the fact that it is more widely accepted that Value is perceived or subjective. I found this definition of value to be beneficial:

Value creation depends on the relative amount of value that is subjectively realised by the target user who is the focus of value creation and that this realisation has to translate into the user’s willingness to exchange a monetary value

David, Smith and Taylor Academy of management review 2007, vol 32, no.1 180-194

In a nutshell, to convert our perceived value to financial value, we need to check that the recipient of our offering values it enough to pay for it. We need to focus on offering value by meeting needs and wants.

Focus on meeting needs and wants

We are all meeting needs and wants in one way or the other. At home, at work, volunteering, and so on, All these are great but this is where I explore the theory of marginal utility more. Sometimes the value we offer diminishes over time and it is important to evaluate your value offerings. If you are in a relationship, for instance, you don’t stop at “I am offering value to my partner because my beautiful self exists and they should be grateful to be graced by my presence”. instead, you reassure them by finding different ways to add new value or remind them of your value.

Financial freedom by value creation

The cashflow quadrant is a top personal finance book by Robert Kiyosaki and describes 4 quadrants (E S B I). The E and S are on the left side and stand for employees and self-employed. While the B and I go on the right side of the quadrant. B stands for big business with over 500 employees and I stand for Investors. Kioyasaki postulates that everyone resides in at least one of the quadrants. While he admits that financial freedom can be found in all 4 quadrants, he insists that it is the skills for B and I that will help you increase your financial value more quickly. One of the things required to move to big business and investors think is a huge mindset change. You can get Robert Kiyosaki’s book below:

This is is what I am advocating for with this post, a mindset shift from just doing to value creation by addressing specific or identified needs.

Most of the wealthy people/companies we know today started by identifying a need and meeting it. My favorite being Bill Gates whose vision of “A computer on every desk in every home” made him a billionaire.

Increasing your perceived value

We have established from the definition above that what we consider as Value may be subjective. Therefore, the only way to increase our financial value is by convincing someone else that what we have is valuable enough for them to pay for it. We can increase the customer’s perspective of what we are offering by doing the following:

Understand your customer

To increase your value offering or showcase it so that it is of utility to the recipient, it is important to understand your customer more. For instance, if you are an employee, do you understand your company’s vision enough to incorporate that in meeting your KPI’s? Understanding what your recipient wants is crucial to whether what you are offering is valuable enough to demand more money or attract a premium price.

Sell yourself more

You identified your values, understand your identity, and the way you want to be perceived. You have all these wonderful gifts, skills, and talents. Are you communicating this effectively?

I use to believe that if I am working hard enough this will be visible to those around me and it should. However, sometimes people around are not perceptive. So you need to showcase your self more. I am addressing myself here as well. As an introvert, I have struggled with this a great deal. It is now a matter of urgency to network more, collaborate, step out of my shell, and engage with the people that I am offering value to. This will help me understand what they need more so that I can directly address it. Please feel free to drop me a message, ask a question, book a coaching session and I will get back to you as soon as possible.

Key take aways from the value series

• Make sure you have established your core values and are sending the right messages.
• Remember to identify your personality, skills, and creations.
• Are they known to others? Have you communicated this accurately to the people you work or do business with? This is your USP and just like companies make you stand out.
• How are you or your business perceived?
• Can you identify your value proposition and what you are planning to exchange and is there a willingness to pay for it? This is not just for business owners but for employees too
• Can you identify a problem that needs to be met? Can this translate to a business idea or a solution at your workplace?

Conclusion

Value creation strategies are a bit more complex when organisations use it. This is because it requires breaking down processes to identify value at every stage of the creation process. However, I have adapted this into the 3 V’s for personal value creation. The process of identifying your USP will inject a lot of self-belief that will take your confidence to a whole new level. Believing you can do more, bring value is the starting point. So take action, and go through the series again to complete all the exercises. Then take it from discovery to mastery so that you can start to demand more from your employers or create a product or business that sells.

Drop me a comment, send me an email if you have any questions. and as always pin and share on your social media platform. Have a valuable and fulfilling week!

Live daringly, boldly, fearlessly. Taste the relish to be found in competition-in having put forth the best within you.

Henry j. kaiser

Series Navigation