Profit, Risk & Brand

Sonder
December 12, 2019

As Peter Drucker put it: “All profit is derived from risk.”

That theoretically if you take on an increased amount of risk, you can increase the amount of profit that you make in business.

Another way to look at this idea of risk and pricing - is to look at costs and value. When most people price, they charge for what they think it costs -then throw a little premium on top for what they think they are worth at the time.

This is backwards because if they were accounting for the (1) true cost and (2) risk premium- they would price for profit differently. They would take in account the extra costs typically ignored (but that are very real) including the cost of equipment, the hardware and software used and overhead- but most importantly they would price based on value and value is something that is determined in the customer's mind. It is based on economical value but largely based on the psychological value provided by a product or service.

Next time, don't randomly throw your price together based on your gut or what your competitors are doing. 

Account for risk. Account for your true costs. And account for true value added.

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