ValueStar wants businesses to pay for the privilege of sporting its seal of approval. Is it a public service, or a shakedown?
By Lisa Davis
Jim Stein would like to tell you where to go.
If you need a plumber, an auto mechanic, or even a dentist, Stein is prepared to help you find one you can trust. Seven years ago, the Alameda businessman left his career publishing yellow pages directories, and founded ValueStar Inc., a private company that aims to help the desperate and confused navigate tricky commercial waters and find good companies with which to trade.
ValueStar promises to screen the thousands of businesses operating in the Bay Area and give its stamp of approval -- literally, a gold star -- to those that pass Stein's test for customer satisfaction.
In theory, you can look for the ValueStar seal in a business' advertising. You can get free ValueStar publications listing companies that pass muster, or you can look them up on ValueStar's Web site. You may have already heard some of ValueStar's radio advertisements, urging you to shop with the ValueStar endorsement in mind.
The company fashions itself as a better referral service than Consumer Reports or the Better Business Bureau, because it harvests the word-of-mouth opinions about particular local businesses, weeding out the companies that don't have happy customers.
Stein hopes to eventually make ValueStar a household name. He sees a day when consumers in and around San Francisco -- indeed, most of the nation's major cities -- won't buy tires or pick a nursing home without looking for that all-important gold star.
But before you start feeling all warm and fuzzy about Stein's quest to separate the good guys from the shysters, there are some things you might want to know about ValueStar itself.
For instance, unlike Consumer Reports or the Better Business Bureau, ValueStar is a for-profit company. Businesses pay for the privilege of being subjected to ValueStar's screening process, and then pay more to use the gold star in their advertising, or be highlighted in ValueStar's publications. ValueStar's profits -- and it hasn't made any yet -- are directly tied to how many businesses it can sign up.
After seven years, ValueStar's success rate in enlisting businesses isn't very good, and the listings for the Bay Area are of scant use to consumers. For instance, there is not a single florist or caterer in San Francisco that has earned the gold star. That doesn't mean there aren't plenty of good florists and caterers, but that none have seen the need to pony up the fees ValueStar charges.
For the relatively small number of companies that have won the star, ValueStar's endorsement doesn't guarantee much of anything. Before awarding the honor, ValueStar calls previous customers it randomly selects from each business, to see if most say they were satisfied with the service they received. The ValueStar screening does not attempt to determine if a company's product is good, or safe. It does not look into whether a company's prices are competitive, or consider a company's track record on handling customer complaints.
ValueStar certainly doesn't consider itself expert in skin care, tile laying, bookkeeping, or many other fields in which it nonetheless is prepared to endorse companies for your patronage.
More disturbing, however, is that some of ValueStar's business tactics appear to border on strong-arming. One businessman who runs a home care and hospice company in San Francisco compares a mailing he received from ValueStar to a "ransom note," with its oblique threat that failure to seek the ValueStar seal of approval could hurt his business.
ValueStar, meanwhile, has problems of its own. It's been losing money from day one. Numerous liens have been filed against ValueStar for nonpayment of taxes, and it has been successfully sued twice in the past two years by creditors seeking payment of overdue bills.
Those are just some of the things you might want to consider before letting Jim Stein and ValueStar look out for your best interests.
Jim Stein has been in sales of one sort or another for most of his adult life. The 40-year-old Southern California native took over a small shopping guide in the early 1980s and in about 10 years turned it into the Bay Area's Asian and Hispanic Yellow Pages books. The company grew into a multimillion-dollar business with 24 publications, including El Mensajaro, the weekly Spanish-language newspaper. Stein, who lives in Sebastopol, sold the business in 1990.
He began tinkering with the ValueStar concept shortly thereafter, designing the gold star, and refining what it should stand for. He has become a man utterly devoted to his new product. During a recent tour of ValueStar's Alameda operations, Stein carried around with him an oversized cardboard cutout of the ValueStar logo.
Initially, the operation consisted of a handful of people, and awarded its star to only about 100 companies, while Stein worked on various parts of the marketing plan. ValueStar spent a lot of money with little return. Essentially, Stein faced a chicken/egg problem -- businesses didn't want to pay for the ValueStar screening until it was established among consumers, but it couldn't become well-established until enough businesses paid for it.
In late 1995, Stein decided to amp up the operation, trying to reach the critical mass necessary to launch ValueStar into the public eye. He sought out investors and hired a bigger staff. He beefed up the company's marketing, with radio and bus ads that featured former television consumer advocate Chris Bjorkland. The next year, Stein took the company public. It has since traded around the 75 cents to $1.50 range on the over-the-counter market.
Last year -- even though its hold on the Bay Area is still weak -- ValueStar began expanding into the Los Angeles market. This February, it moved into Chicago, after market research told Stein that consumers in the Windy City were hungry for help. Stein sees ValueStar eventually expanding across the nation.