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Value vs. Profit

by Sally Schroder

What is the difference between the cost to produce a good or service and the price paid for it?

Most of us would say “profit.” The more correct answer is “value.”

When an enterprise provides customers goods or services that have value to them, customers will pay for that value. If customers will pay more than the enterprise’s costs, it earns profits.

Different customers will perceive value differently, and perceptions change over time. Determining how customers define value is a never-ending task.

We must always ask, “Am I delivering what the client values?” If we deliver value, profits will follow.

– Kip Caffey, Cary Street Partners

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