15 December, 2013

1-5-2 finance: Value capture

-          Every "value form" creates value for people who pay for it, and that value can be converted to a certain amount of money
-          Usually, for every "value form" to be created and ready; a certain amount of money must be spent on it. Except for some "value forms" that depends mainly on mere human skills
-          Almost all the time the value that a "value form" creates –translated into money- is more than the amount of money used in its creation

Value capture means that: every business must keep some money of what it makes- a percent of what it makes in form of sales

-          That is related directly to the profit margin: the more you can capture from a "value form" and the less you spend on it to create, the more your profit margin is, the better :)

A general rule of thumb:

Capture 10% ± of the value you create.

Of course that is changed according to a lot of factors, for example the scarcity of the "value form", the segment of customers you are targeting …. Etc.