Marklin Financial Services LLC

A concept that was explained to me way back in my college finance class was opportunity cost. It, however, is involved in nearly every decision I make today.

Opportunity Cost (OC) is the cost of any activity measured in terms of the value of the next best alternative foregone. In other words, if you choose A over B, the cost of B, or the lost profit of B, is your opportunity cost.

-If I buy a product cheaper online, then the OC is the extra cost of buying it at a brick and mortar store.

 -If I choose to ride my bike to an event, the OC is the cost of gas and wear and tear on my car to get there.

 -If I choose to eat dessert, the OC is the extra pounds it will put on my body.

 -If I choose to change jobs, the OC is the loss of income of the job I give up.

 -If I choose to buy another grocery store, the OC is the loss of consulting income since I will have less time.

Thinking about the OC ahead of time, helps me quantify the two alternatives, which helps me make the best decision.

Inherently, we think about OC all the time. But rarely do we actually take the time to put dollars and cents into the two decisions. Sometimes, they are not easy to quantify. And sometimes we don’t know all the aspects of the other decision ahead of time.

-There was a huge OC (benefit) for those who did not go into the Twin Towers on 9/11.

 -A man decided to go to an event. He met a woman at the event he later married.

We don’t have the luxury of using hindsight to make the best decision. But we do have the ability to make the best decision with the facts known ahead of time.

John Marklin

www.marklinfinancial.com

For the past few years, Debbie and I make a mad rush in January and February to see all of the movies up for an Academy Award. We started our annual dash last weekend and saw three movies. The one I liked the best so far was The Artist, a silent black and white movie.

Admittedly, I was a little reluctant to see a movie with no sound. Other than a few old-time comedy flicks, I really can’t remember sitting through an entire silent film.

But this movie is wonderful. The story is about a popular Hollywood silent movie star in the 1920’s who falls in love with an actress rising in fame as she becomes a star in “talkies”. The actor, however, refuses to adapt his acting style from silent to movies with sound. Hanging onto the past, he struggles and falls from stardom.

During the movie I found myself concentrating more so as not to miss any gestures that I would take for granted with sound. The movie had drama mixed with comedy and the 1 hour and 40 minutes seemed to fly by.

Afterwards, I reflected on the struggles of the “artist” and how it plays out in so many other later adaptations. Moving from hardbound encyclopedias to internet based media like Wikipedia was traumatic for the World Book encyclopedia company. Transitioning from film to digital cameras caught on like wild fire and left some companies like Kodak filing for bankruptcy as they were slow to change. And the switch from land line phones to cellular phones has resulted into some of the biggest companies yet like ATT and Verizon as well as hardware manufacturers like Apple and Nokia.

Another industry that has experienced rapid change is coffee. Starbucks are now seemingly on every corner and stores like Panera have become very popular with the young business crowd. Giving customers more choices in coffee has become very popular.

A month ago, we looked at changing the way we sell hot coffee in our Bridgewater Foods Supermarket. Forever, we brewed one flavor of coffee in the deli and served it in small and large cups to our customers. We looked at ways to do things differently and came across a company willing to invest in our coffee business. Within a month we added a coffee kiosk in the store that offers six different flavors in canisters (including my favorite Fog Heaven). We now have small, medium and large sizes and our coffee sales, as well as doughnut and pastry sales, have increased.

How do you adapt to changes in your line of business?

John Marklin

www.marklinfinancial.com

Back in 1978 and fresh out of college, Debbie and I got into the real estate market in St. Louis and bought our first house. A one bedroom bungalow in south St. Louis on Carlsbad Ave. We had little money at the time but both had good jobs and were getting married. We paid less for that house than I paid for my Hyundai Azera that I now drive. We put 20% down and took out our first mortgage.

With help from family, I knocked down a wall to enlarge the kitchen and installed used cabinets. My brothers cut and installed Formica counter tops and a kitchen island. We laid the vinyl flooring and painted all the walls after removing the dreaded wallpaper. A lot of work, but it was just our “starter home”.

Two years later, we bought a two bedroom home at double the price of the first home. Three years later, we bought a larger home in New Hampshire when I transferred jobs, and another larger home when I returned to St. Louis a year later. Five years later we moved to Reading, PA and bought our first “newly constructed” home and five years after that we then moved to Richmond and bought another new home.

For much of my life we lived in a real estate boom hence we made money on each house we sold. Plus the relocation bonuses paid by my employer (a thing of the past) helped defray closing costs. Starting out small eventually landed us in a larger new home.

Just a year ago, my business partner and I bought our first grocery store; a small Save-a-lot (SAL) in southwest Virginia. Nine months later, we bought a much larger IGA store in western Virginia. Buying the SAL was a strategic move for us. We used those nine months as a learning tool to decide if we really meshed as partners. We also worked out the organizational processes before we jumped into the big leagues with a store doing three times the volume. We were comfortable with our abilities and were convinced we could take on a bigger challenge.

Our stores are performing as expected and soon we will be looking for others to buy.

A few months ago, I spoke to a young person who appeared to be so excited. After asking why the glee, she told me she bought her dream home at the age of 26. With three bedrooms, 2 and ½ baths and granite counter tops, she had the home she always wanted.

The generation today wants things bigger and faster than my generation. I see this in other things as well: the perfect job, the best computer or phone, and new things instead of used.

Wanting bigger and faster is not wrong, it is just a change in thinking.

But for me, that  house on Carlsbad was the start of little things that ended up very big.

John Marklin

www.marklinfinancial.com

On our trip back from Hawaii, Debbie and I enjoyed an in-flight movie Courageous. The movie, about four police officers each coming to grips with the challenges of fatherhood, struck a chord with me.

-My father was a courageous man. He stood up mainly for his belief in the Catholic faith. Never wavering to anyone challenging his belief in God.

-My mother’s father was a courageous man. A strong man who was committed to his family and his trade as a carpenter. In his retired years he devoted much of his time volunteering on special handyman jobs needed in our parish.

-My mother’s brothers were courageous men. All served in the military and three gave their lives for our country.

-My friends Steve Martin and Dave Bolduc are courageous men. They devote much of their time volunteering and leading the Richmond Boys-to-Men organization into becoming a change agent for boys at risk.

-My friend, Father Dan O’Rourke. A Montana priest and mentor who has taught me the power of listening over speaking and observing the good in people.

I am sure you know of courageous men in your life. Men who do the uncommon. Those who do what they say they will do. Those men who are accountable for their actions blaming no one but themselves for their failures.

Take a moment to reflect and think of the courageous men in your life. And pray that you can live like they do.

John Marklin

www.marklinfinancial.com

Debbie and I are in the Hawaiian islands with our good friends from St. Louis, Barb and Kevin Smith. We spent our first 3 days on the island of Oahu and devoted a whole day to sightseeing on Pearl Harbor.

We did the customary trip to see the sunken battleship USS Arizona, then a tour of the USS Missouri (Mighty Mo) where the war with Japan officially ended with the Japanese surrender. Next stop was a tour of the submarine USS Bowfin.

We ended the day with a tour of the US Veteran’s grave site (known as the “Punch Bowl”) where thousands of the deceased veterans of the wars in the Pacific were buried. We were on a mission to find the grave site of an uncle, my mother’s brother Richard Grosch, who was killed by a Japanese sniper on Tinian Island. We found the grave site, dusted it off, and gave remembrance to Richard and all the men and women who lay at rest in the Punch Bowl defending the American cause. The above photo is of his tombstone and the majestic tree that adorns his grave.

My mother had three brothers die within two years during the war (two in service and one right before enlisting). She occasionally told us stories about her brothers whom I never met. My mother has never been to Hawaii and thus never seen the grave. Hopefully she will feel some sense of finality now that I can bring a photo of Richard’s grave back to her.

December 7, 1941, was a day that will “live in infamy”. The rally cry from the Americans to defend our country after that brutal assault by the Japanese on Pearl Harbor was a signature event. It showed the strength, resiliency and commitment Americans had when our backs were against the wall.

Our tour guide on the Mighty Mo told of a story where a Japanese Kamikaze pilot tried to blow up the ship. The pilot was shot down just in time and diverted the plane which brushed the side of the battleship. The pilot was killed when his plane went into the sea. His body was recovered and the Captain of the USS Missouri ordered a full Japanese burial for the fallen man. He said this man was fighting for his country, no different from our men and women fighting for our country, and he deserved a proper burial. The US sailors later constructed a Japanese flag to be used in the burial ceremony and dropped it into the sea along with the body.

The captain of the Mighty Mo showed another side of America, compassion and dignity. It made me proud to be an American.

John Marklin

www.marklinfinancial.com

The 2012 Mizzou football schedule was published over the weekend while I was in St. Louis for Christmas. It got quite a bit of front page news in the paper and lively chatter among family and friends since Mizzou will be moving to the SEC after many decades of playing in the Big 8 and later the Big 12.

My first reaction was fright. Living in Virginia, we are exposed to constant TV games highlighting the SEC. When I worked in Birmingham, AL for three years I got firsthand experience of the craziness of the Alabama football fans. Daily playing of the Alabama fight song on the radio at noon and seemingly everyone had the Alabama fight song as their cell phone ring tone. SEC fans and their teams take football very seriously and seem to live for a football win on Saturday. I didn’t know if Mizzou would be ready for this level of football mania and feared being mediocre in a cut-throat conference.

I also was saddened by leaving the “friendly” competition that we Mizzou fans grew up with. Iowa State, K-State, the proverbial tough Texas and Oklahoma teams, and of course the hundred plus year rivalry game with Kansas. A friend told me that Kansas refused to play Mizzou this year as a protest over leaving the conference. Whatever the reason, there won’t be a Mizzou-KU game in 2012, breaking one of the oldest rivalries in college football. Those kind of streaks come around every hundred years or so. I won’t see another one like it in my lifetime.

It seems like sports is changing ever so fast because of the money. It is diluting the long standing traditions and also is diluting fan loyalty. Sure, it seems like college football right now is unsurpassed in its level of interest. Just look at ESPN game day. Rabid fans everywhere and it’s tough to watch anything on TV on the weekend, and even during the week, except college football. But everything goes in cycles. Packed stadiums today will have trouble filling them in the future. It may take time, but it will eventually happen.

And then universities will have to find ways to keep the revenue stream coming. More moves to other conferences will develop as teams follow the money trail.

But for now, Mizzou football seems excited to be playing teams they only heretofore saw on TV. Mizzou, I believe, will be successful, and they will attract better football athletes since they will be showcased in the SEC states. And let’s not forget the other sports. Mizzou will be a powerhouse in the SEC in basketball and I am sure they will be competitive in the other sports as well.

I am excited for another reason. They will be carried on TV more on the east coast. Ms Debbie and I have a full season of Mizzou football on TV to look forward to in the Old Dominion state of Virginia.

Go Mizzou Rah Tigers!

John Marklin

www.marklinfinancial.com

Last Thursday (three days before Christmas) was to be a big sales day for retailers, including grocers.

Our IGA store was ready for business. Extra product on the shelves, the smell of fresh baked goods in the air and some employees wearing Santa hats which was a nice complement to our Kelly green uniform shirts.

The day was busy and on pace for a robust sales day. Then, at 3:18PM, things could have changed for the very worst had it not been for some very good employees and understanding customers.

I received notice from Cheryl, our front end manager, that the credit/debit card system was down. This has been happening in the past but usually comes back after a few minutes. So we called in the outage and hoped for the best.

We do about 50% of our business with debit/credit. The other is cash or checks. Debit/credit has been so ingrained in our buying patterns that many people rely on the processing system to work all the time and often times carry little cash.

We received notice from the third party carrier that they did not know what the problem was. Hmmm. Many things ran through my mind; all scenarios were not good.

It was apparent that we may be done a while. And I became furious about the problem. Hanging on the phone, trying to understand what was going on and how to minimize the damage.

Then I saw true professionalism played out right before my eyes. First with our employees. Led by Cheryl, a sign was quickly posted on the door explaining the our debit/credit card system was down. We opened up all cashier lanes to handle the customers. Then she quickly told the cashiers what to say to the customers: describe the situation, apologize and give the options of paying in cash or checks or writing down credit information to be processed later when the system returned.

The calmness of the explanations from the cashiers to the customers was admirable. And the response from the customers was even more amazingly calm. One could have thought the busyness of the holiday season would bring out irate responses. But not one! Not for the entire 4 ½ hours the system was down. People seemed to understand that these things happen and that we were doing all we could to make a very difficult situation a little better.

We blanketed the front end with employees helping to bag, take out groceries or do anything possible to make a bad situation a little better.

The system came back on at 8:04PM. We had gone through the busiest part of the day with an archaic system. But we seemed to survive. Very few customers left because they couldn’t pay. And very few complaints.

We are making plans to add automated backup to our system to minimize this risk from happening again. In the meantime, it is comforting to know that we have a wonderful group of employees and customers.

John Marklin

www.marklinfinancial.com

It is difficult to pin point what makes someone finally crack and do something drastic. It usually is a series of little things that add up and finally a person has had enough and is ready to make a change.

This happens in the grocery business all the time. Employees or customers become annoyed at what might seem to be the littlest of things. A carton of milk that is spoiled. A bad bunch of bananas. Having to work on a regular scheduled off day. Told to do something contrary to the way you have done the same task forever.

As an owner or manager, it is easy to overlook the importance of seemingly little things. We are focused on the big picture. To us, asking someone to stay an extra 30 minutes to cover a heavy shift might not seem like a big deal. But to the employee who has a big date that is being pushed off ever so slightly, it may seem to be a huge deal.

Unfortunately, we are immune to the crescendo of these little things until it finally gets to a decision point. We are then shocked when the employee confronts us with his resignation. We ask why. And then we get the series of answers; all the little things brought to our attention that we chose to overlook.

The true test of a manager is to spot the little problems and address them before they get to the boiling point.

John Marklin

www.marklinfinancial.com

Around noontime yesterday I flipped on ESPN while I was eating lunch and saw the gut wrenching news for the first time. Albert Pujols just signed a 10 year $250M contract with the Anaheim Angels. Like most red blooded Cardinal fans, I was mesmerized about the announcement and could not believe it.

How could he do it? Why would he do it? He had arguably the best job in sports, in the best baseball town in the country. He was loved, not only for his achievements on the field, but for his philanthropic acts off the field as well. He was well spoken and always seemed to have something logical to say. He was a leader and his teammates longed to be around him in the clubhouse and the dugout. He could have any position in St. Louis that he wanted after his playing days. He could join the ranks of Shannon, Musial, Gibson and Ozzie and become ambassadors for the Cardinals and the city.

All that is now gone, with a very quick decision made yesterday (the Angels apparently just started the serious negotiations 48 hours before the decision).

I wished Albert was different than most. I hoped he would not let his ego and race to be one of the highest paid players (no matter where it took him) rule his life. I wanted to see the greatest player of my generation wear only one uniform.

The rest of yesterday was consumed with watching the news and reaction of the fans in St. Louis. I wanted to know how my 86 year old parents thought of the decision.My Dad said he was appreciative of Albert’s efforts, but sad to see that his ego got in his way. And one thing is now for sure. He will never top Musial’s records as a Cardinal!

So today I feel different. I say thank you Albert for 11 great years. But no one man is bigger than the Cardinal organization. The Cardinals thrive upon being underdogs and always seem to make good mid season moves with cast off players. That is what is exciting about them. The strategy. The fight. The effort.

And who is to say that we don’t have another Albert in the wings with David Freese?

John Marklin

www.marklinfinancial.com

Here are a couple examples of recent bad behavior and how the offender responded to his actions.

-Herman Cain, the Republican presidential candidate, is immersed in rumors and innuendos that he sexually harassed women and had a 13 year extra-marital affair with a women. His reaction: complete denial any of it ever happened, but reported tonight that he may have to re-think his presidential bid since it is becoming a distraction to his campaign.

-Ndamukong Suh, the Detroit Lions football star defensive lineman overtly stomped on a competing athlete’s arm in a nationally televised game last week drawing a round of boos and embarrassment to the NFL. The league responded with a suspension of two games for Suh; a big blow to a talented Lions team in a playoff rush. His reaction: only after being charged with the suspension did he call the league commissioner to apologize, hoping to have his suspension reduced.

-Conrad Murray, Michael Jackson’s attorney, was found guilty today of involuntary manslaughter and sentenced to four years in prison. His reaction: nothing. No remorse whatsoever shown to the Jackson family for his actions.

-Gary Pinkel, the Missouri Head Football coach, was recently caught by police and charged with a DUI. Pinkel chose to take the high road and has apologized and has accepted his sentence of community service, suspension of a game’s pay, no bonus if the team wins a bowl game and having his pay frozen next year.

One of these men, Suh, chose to wait until the behavior became known and then decided to show a staged level of remorse. One, Cain, chose to flat out deny the allegations. Another, Murray, showed no emotion or reaction. And the fourth, Pinkel, did demonstrate a bit of sorrow and acknowledgement for his actions.

Now consider how one of my shoppers handled a bad situation. I was called to the front of the store and met a woman who was suspicious that her child had stolen a piece of gum from my store. She asked if I had video cameras and she wanted to see if I could watch them to validate her suspicion. After I explained that would take a very long time to prove, she asked if she could use the “presence of cameras” as an inducement to get her son to admit guilt. I agreed.

The next day she appeared with her husband and son. Her son admitted that he had taken the gum and said he was sorry. He welled up in tears and said he would never do it again. I told him I accepted his apology, believed that he was sorry and said I forgave him. I then told him he was welcome in my store any time.

It was such a breath of fresh error to see firsthand parents and their son handle a very delicate and difficult situation. The parents were strong in their conviction of demonstrating proper behavior. The son was contrite and remorseful and will probably think twice about doing something bad in the future.

John Marklin

www.marklinfinancial.com