Profit, Loss, And Value

Let’s imagine that you are providing a service to a company and they are paying you $2000 a month for the service. Let’s pretend that it costs you $1500 to provide the service. On an accounting income statement, we would say that we have $500 net income. The statement would look like this:

This income statement shows us that the value of this work to us is $500. But the customer doesn’t feel the same value. The customer values the work at $2000.

Your customer has a problem that needs to be solved. They cannot (or choose not to) do the work themselves. They are willing to trade $2000 to make the problem go away. They place a higher value on having the problem solved than they do on living with the problem and spending the $2000 on something else.

You are willing to solve the problem, but and will get a $500 profit. Profit is the money that goes to the benefit of your company (or yourself as an owner.)

You see a value of $500.
Your customer sees a value of $2000

Where To Focus

Always focus on value from the customer’s perspective. Solve the problem for the customer. Make them feel that they have received all of the value that they paid for. (Give them a little bit extra too.) If you focus on the value from the customer’s perspective, you will give them what they need. And at the end of the day, you still have your profit.