What is Value?

The definition of value is the worth of something compared to the price paid or asked for it.

We can all find the price of an item or solution, but is it always obvious what the value of an item or solution is? It may be nothing to do with the price.

Similarly, we all know the claimed features or broad benefits of our solutions, but do we usually quantify the financial impact that they may have, and compare it against the price required to implement it? "No" is often the answer.

Value examples in practice

A basic value decision could be switching to a cheaper electricity or mortgage provider. A simple comparison of current running costs versus future running cost is the basis of a value decision that we all take in our stride throughout our lives. Current costs versus future cost, if it’s positive then it’s a straightforward decision!

Calculating value in business

However, selling and deploying business solutions into public or private sector is certainly more complex, but still needs a basis upon which business decisions must be made. It could be summarised as follows:

Current situation:

1. What are we paying now to deliver the current infrastructure, service level, information, features and benefits inside our organisation?

After a future solution is deployed:

2. What is the new ongoing price and additional internal costs for the new solution?
3. More importantly, what additional benefits (financial and non-financial) do we enjoy?

Communicating value in business

We need to have a new conversation about c) the benefits and encourage the customer to allocate a quantifiable $ value to the improvements that they could enjoy following the deployment of a new solution. Only then will we have a credible proposition that it’s not about price, but about the value that it creates inside your customer’s business and organisation.

Benefits can take many forms: cost reduction, cash collection improvements, margin and revenue improvements, better buying, improved customer loyalty, risk reduction… a whole range that can be influenced inside the customer depending upon the maturity of their current situation and what would change after the new solution is deployed.

The net value will be quantified by counting all the additional benefits that the customer agrees to, allocating a timely start to those benefits, comparing them against the total price from you as a supplier, and very importantly including their own internal costs as well to see whether this creates an overall position which is positive or negative.