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Money
Pricing, margin, cash and what a thing is actually worth.
- Adam SmithScottish moral philosopher and political economist (1723–1790), professor at Glasgow and confidant of David Hume, whose Theory of Moral Sentiments grounded ethics in sympathy and whose Wealth of Nations founded the modern discipline of political economy, providing the framework within which commercial society has been understood for two centuries.FiguresPhilosophyEnlightenment
- Baumol's cost diseaseWages rise in sectors with no productivity growth because they must compete for labor with sectors that have it.ConceptsBusiness
- Break-evenThe level of sales at which total revenue covers total cost and the business makes neither a profit nor a loss.ConceptsBusiness
- BundlingSelling several things together at one price rather than separately.ConceptsBusiness
- Burn RateThe rate at which a business consumes cash, usually stated monthly.ConceptsBusiness
- Capital allocationDeciding where a business's available money goes: back into growth, into paying down debt, into reserves, or out to the owners.ConceptsBusiness
- Cash Conversion CycleThe time between paying for work and being paid for it.ConceptsBusiness
- ChurnThe rate at which customers leave.ConceptsBusiness
- Comparative advantageThat it pays to specialize by opportunity cost rather than by skill.ConceptsBusiness
- CompoundingGrowth applied to a base that already includes previous growth.ConceptsBusiness
- Customer acquisition costThe fully loaded cost of winning one customer, including the salaries of everyone who touched the deal.ConceptsBusiness
- Gross MarginWhat is left from revenue after the direct cost of delivering it.ConceptsBusiness
- Hidden costA cost that is real but never invoiced, so it never enters the decision.ConceptsBusiness
- How much to charge as a consultantTake the number you first thought of and double it.GuidesBusiness
- How to make a business sellableA business sells on predictable revenue that does not depend on the owner.GuidesBusiness
- How to move clients from projects to retainersStop selling the deliverable and start selling the ongoing outcome it was meant to produce.GuidesBusiness
- How to price a retainerPrice the outcome and the access, not the hours.GuidesBusiness
- How to raise your ratesRaise them on new business first, at the number you are afraid to say out loud.GuidesBusiness
- How to value a service businessA buyer pays a multiple of profit, adjusted for how much of it survives without the owner.GuidesBusiness
- Lifetime ValueThe total gross profit a customer produces before leaving.ConceptsBusiness
- Margin of safetyThe gap deliberately left between what a plan requires and what it can actually withstand, so that being wrong is survivable.ConceptsBusiness
- Net revenue retentionRevenue from an existing set of customers this year against what the same set produced last year, counting upgrades, downgrades and cancellations but no new customers.ConceptsBusiness
- Operating leverageHow much of a business's cost base is fixed rather than variable.ConceptsBusiness
- Opportunity costThe cost of a choice is the most valuable alternative given up to make it.ConceptsBusiness
- Payback periodHow long it takes for an investment to return the cash it consumed.ConceptsBusiness
- Pipeline, not runwayThe unit that actually governs whether you can leave a job.ConceptsBusiness
- Price AnchoringThe first number mentioned shapes every number that follows.ConceptsBusiness
- Price discriminationCharging different buyers different prices for substantially the same thing, based on what each is willing to pay.ConceptsBusiness
- Recurring revenueRevenue contracted to repeat without being re-sold.ConceptsBusiness
- The discount spiralThe self-reinforcing pattern in which each discount granted lowers the price the next buyer expects, so the discount that was meant to win one deal becomes the new starting point for all of them.ConceptsBusiness
- The Ownership LedgerEvery hour you spend produces something and somebody ends up owning it.FrameworksBusinessWhether the thing in front of you builds something you hold, or something somebody else does.
- The Promise RatioSelf-confidence equals promises kept to yourself divided by promises made.FrameworksBusinessWhy you do not trust yourself
- The Replacement NumberNot savings.FrameworksBusinessWhat has to be true before you go
- The Sunday NumberA goal with no weekly number is an open loop: you set it in January and feel bad in December.FrameworksBusinessWhy your goals never move
- The time value of moneyA sum of money now is worth more than the same sum later, because money now can be used, invested or spent while money later cannot, and may not arrive.ConceptsBusiness
- The Wealth of NationsNational wealth comes from the division of labour operating in competitive markets — and the standing threat to it is monopoly secured through political privilege.BooksBusiness1776
- Time poor, time richChoosing to be short of time now in order to own your time later.ConceptsBusiness
- Unit economicsWhat one unit of the business earns and costs, stripped of everything that does not vary with it.ConceptsBusiness
- Value Based PricingPricing against the value the buyer receives rather than the hours you spend.ConceptsBusiness
- Veblen goodsA good whose demand rises as its price rises, because the price is the point.ConceptsBusiness
- What to do when one client is most of your revenueTake the money, then spend it buying independence.GuidesBusiness
- Willingness to payThe most a particular buyer would hand over rather than go without.ConceptsBusiness