Satisfactory Margin and Value

“Value is when the outcome of a situation exceeds the cost incurred by a satisfactory margin.”

But what is a ” satisfactory margin”?

Margin is the difference between the amount of cost incurred and the benefit derived. Not all margins, however, are created equal. In order to experience value, the margin must also be satisfactory. For example, a manufacturer produces an item that costs him $10.00 and sells the same item for $12.00. So this item has a 20% margin (($12.00 – $10.00) / $10.00). This manufacturer may be very happy with this margin. But for another manufacturer, and for a variety of reasons, this margin may be woefully deficient.

The point here is not to determine the correct margin for this example, but to recognize that, in order to feel that you are receiving value, you need to feel that the difference between incurred costs and derived benefit is satisfactory. In the workplace, what might be valuable to you may be less so to the person in the office next to you. Value, like beauty, is in the eye of the beholder. So, as you enter into an activity that provides a benefit, knowing what a satisfactory margin will be in relation to your investment of time, energy, and money is very important to know up front.

Image by Alexas_Fotos from Pixabay


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