Understanding Cost Analysis

I used to think charging less would get me more clients. After my trip to the US I realised it just made them trust me less. when i was cheap, clients questioned everything. "why this approach?" "can we try something else?" "i'm not sure about this." so when i raised my rates, they trusted my decisions completely. same work. different psychology. so here's what i've basically realized about pricing: when someone sees a low price, their brain doesn't think "great deal." it thinks "what's the catch?" they start looking for problems. inexperience. desperation. corners being cut. low prices trigger fear of loss, not excitement about savings. but when they see premium pricing, something else happens. "if they can charge this much, they must deliver results." "other people are paying this, so the value must be there." "the risk of not solving this problem costs way more than the investment." premium pricing signals confidence in your work. think about it. rolex doesn't make better watches from a functionality standpoint. but the price tells you everything about what owning one means. same thing with services. a premium project isn't necessarily 10x better in execution. but the price signals experience, systems, proven results. and here's the shift that changed everything for me: i stopped anchoring clients to the price and started anchoring them to the outcome. not "this costs X" but "this will generate Y for your business, and the investment is X." when they're thinking about ROI, the price becomes secondary. your pricing isn't just a number. it's a signal to the market about who you are and what you deliver.

🌍 New paper out in Nature Climate Change on a critical question for climate policy: How does policy sequencing impact energy decarbonization? Led by Huilin Luo and Wei Peng, with Allen Fawcett, Jessica Green, Gokul Iyer, Jonas Nahm and David G. Victor Our team used advanced energy modeling to examine "carrots" (subsidies like those in the Inflation Reduction Act) vs. "sticks" (carbon pricing) - and crucially, the ORDER in which they're deployed. Key findings: ✅ Carrots alone don't achieve deep decarbonization – sticks are needed ✅ Near-term impacts of carrots vary widely by sector and consistency ✅ Timing is critical: delaying carbon pricing by 20 years (vs. 10) increases the eventual price needed by 40% ✅ Carrots boost green industries but don't significantly phase out fossil fuels - sticks are essential for that ✅ With rapid innovation, carrots followed quickly by sticks can be nearly as cost-effective as leading with carbon pricing The research bridges political science and energy modeling to analyze real-world policy tradeoffs. While carbon taxes are economically "first-best," political reality often requires starting with industrial policy - making the transition strategy crucial. Check out Mark Purdon’s great commentary on the paper: Green Industrial Policy Is Not Enough for Deep Decarbonization https://lnkd.in/gURqCbUE Read the full paper: https://lnkd.in/gW52_bcC #ClimatePolicy #EnergyTransition #ClimateScience #InflationReductionAct #Decarbonization

An unacknowledged loop costs more than any front-facing glitch. 𝐇𝐢𝐝𝐝𝐞𝐧 𝐟𝐚𝐜𝐭𝐨𝐫𝐢𝐞𝐬: They’re the invisible vampires of your organization, quietly draining time, resources, and budgets while you’re focused on the shiny, visible processes. On paper, everything looks great—clear plans, detailed KPIs, and a confident team. Yet deadlines slip, and costs balloon. Why? Because beneath the surface, there’s an uncharted underworld of rework, ad-hoc fixes, and undocumented processes keeping the ship afloat. This “hidden factory” might be a production operator manually fixing defects or a marketing coordinator managing spreadsheets because the CRM can’t handle reality. It’s work that doesn’t show up in reports but shows up in your margins. 𝐖𝐡𝐲 𝐝𝐨𝐞𝐬 𝐭𝐡𝐢𝐬 𝐦𝐚𝐭𝐭𝐞𝐫? Armand Feigenbaum, the OG of Total Quality Control, nailed it: You can’t fix what you don’t measure. Hidden factories consume 𝟐𝟎-𝟒𝟎% 𝐨𝐟 𝐚𝐧 𝐨𝐫𝐠𝐚𝐧𝐢𝐳𝐚𝐭𝐢𝐨𝐧’𝐬 𝐜𝐚𝐩𝐚𝐜𝐢𝐭𝐲 and can be the difference between thriving and surviving. 𝟓 𝐏𝐫𝐚𝐜𝐭𝐢𝐜𝐚𝐥 𝐒𝐮𝐠𝐠𝐞𝐬𝐭𝐢𝐨𝐧𝐬 𝐭𝐨 𝐄𝐱𝐩𝐨𝐬𝐞 𝐚𝐧𝐝 𝐑𝐞𝐝𝐮𝐜𝐞 𝐚 𝐇𝐢𝐝𝐝𝐞𝐧 𝐅𝐚𝐜𝐭𝐨𝐫𝐲: 𝟏) 𝐔𝐬𝐞 𝐒𝐦𝐚𝐫𝐭 𝐌𝐞𝐭𝐫𝐢𝐜𝐬: Track hidden work with tools like MES and advanced KPIs (e.g., DPMO). 𝟐) 𝐋𝐢𝐬𝐭𝐞𝐧 𝐭𝐨 𝐄𝐦𝐩𝐥𝐨𝐲𝐞𝐞𝐬: Create systems to capture frontline feedback and reward solutions. 𝟑) 𝐒𝐭𝐫𝐞𝐚𝐦𝐥𝐢𝐧𝐞 𝐏𝐫𝐨𝐜𝐞𝐬𝐬𝐞𝐬:  Map workflows, eliminate waste, and simplify handoffs. 𝟒) 𝐁𝐞 𝐏𝐫𝐨𝐚𝐜𝐭𝐢𝐯𝐞:  Use predictive tools and preventative maintenance to avoid surprises. 𝟓) 𝐓𝐫𝐚𝐢𝐧 𝐂𝐨𝐧𝐭𝐢𝐧𝐮𝐨𝐮𝐬𝐥𝐲: Teach Lean and Six Sigma to empower a culture of improvement. 𝐅𝐨𝐫 𝐚 𝐝𝐞𝐞𝐩𝐞𝐫 𝐝𝐢𝐯𝐞: https://lnkd.in/ehy-XhAr ******************************************* • Visit www.jeffwinterinsights.com for access to all my content and to stay current on Industry 4.0 and other cool tech trends • Ring the 🔔 for notifications!

Many founders treat pricing as a revenue optimization problem. Figure out the product first, scale usage, then monetize. That's backwards. Pricing isn't about extracting money. It's about discovering whether you built something people actually value. At Gamma, we used pricing as a proxy for value and kept it pretty much the same for over 2 years. Free usage will lie to you (especially for B2B and prosumer products). Usage spikes feel like PMF. They're not. Usage without payment tests your onboarding, not your value. If you come out with too generous of a free plan, you'll never know what true willingness to pay looks like. Here's how to use pricing as a proxy for value: 1. Pick your value metric Choose the thing customers actually hire you for. Documents generated. API calls. Minutes transcribed. At Gamma, we gated by AI credits as the primary value metric, with business levers like custom branding. 2. Draw a hard boundary between free and paid Let people experience the "aha," then stop them at a generous but bounded gate. We gave users plenty of AI credits up front. Once they hit the limit: upgrade for access to more AI. 3. Research your range, then let behavior decide We used Van Westendorp to find our starting range. Ask users four price points: too cheap to trust, good value, getting expensive, too expensive to consider. Plot where these intersect to bracket your range. Then test a few prices within it. Research shows what people say they'll pay - conversion shows what they actually do. We watched free-to-paid conversion and early churn signals, picked the winner, and moved on. 4. Instrument retention and talk to customers Track whether paid users keep crossing your value threshold each week. Stay close to customers through power-user communities or direct outreach. Ask questions like: "What job were you hiring us for?" and "What would justify a higher price?" 5. Treat pricing changes like product pivots Once you've validated pricing, the only reason to change it is if you've fundamentally changed what you're selling. We haven't changed ours in two years because the value metric (AI usage) hasn't changed. Constantly repricing means you're still searching for product-market fit. Why this matters: Pricing early clarifies who values you, which channels convert, and which segments to double down on. You're better off launching pricing way earlier so you can see who's actually willing to pay for it.

I was managing an $8,000,000 build in Santa Monica. One contractor's bid was the lowest bid by $400,000. (A significant difference from the other bids) As a general contractor working with subcontractors.  Or  As a developer working with a general contractor. This dilemma is incredibly common. It’s our job as the leader to discern:  • Does the lower bid have sound reasoning behind the decrease?  • Or, is the decrease unwarranted & worth dismissing? Here’s 3 areas to watch out for,  As a passive investor, as a new developer, as a new contractor,  To understand if a bid is properly priced: 1) Normalize the scope before you compare the total with other bids. • A low bid number means nothing until every bidder is carrying the same scope, same quality level, same allowances, and the same inclusions/exclusions.  • That also matters contractually: under AIA guidance, allowances are placeholders, and if actual costs differ, the contract sum gets adjusted by change order.  • So a “cheap” bid built on light allowances is often just deferred cost. 2) Look at the pattern of the low price, not just the price. • If one or two scopes are dramatically low, that is usually a red flag.  • The World Bank guidance is useful here: if the lowest bidder is below others by roughly the same percentage across many subtotals, that can sometimes reflect lower overhead, lower profit, or a more efficient setup.  • But if some items are nominal and others are inflated, FHWA and GAO treat that as unbalanced bidding, which may not produce the lowest ultimate cost. 3) Stress-test the schedule and the handoff scopes. • A suspiciously low bid paired with an aggressive schedule is usually another warning sign, not a bonus.  • If the bidder is vague on sequence, sleeves/penetrations, utility tie-ins, temporary protection, or finish transitions, the number is probably incomplete rather than superior. P.S. Anything you’d add to the 3 that have helped you properly price construction bids? 

Imagine if every time you edited a document, the word processor forced you to retype everything that had been written before that edit. How expensive would that be for a company? This is exactly how data transformation works today. Each time a data engineer modifies some part of the data stack, the Cloud Data Warehouse & its transformation layer recalculates everything. What if the system were designed so that it only recalculated the metrics needed? How much less expensive would it be? Databricks partnered with Tobiko to quantify the impact. Selective recalculation delivers a 9x cost savings. Selective recalculation - only calculating what needs to be - delivers the 9x cost savings. This efficiency becomes critical as data transforms from a business asset into the business foundation itself with AI. Migrating to a new system is often expensive, but with SQLMesh’s dbt adapter, no code changes are required to the existing schema to support this cost savings. In a world where every cloud dollar counts, it’s time to stop forcing your data warehouse to rewrite “War and Peace” when all you need is the Cliff’s Notes — your CFO will thank you.

During college, I had one of the worst jobs of my life. I was a door-to-door meat salesman… While the job was pretty poor – selling a new type of processed food to food service establishments – the idea was actually a good one. My employer was one of the first companies in the US to offer sous vide, a method through which food is cooked inside a vacuum-sealed plastic bag, sealing in juices and freshness. The company hadn’t calculated what value this would create for food service customers, so it priced its offerings on a cost-plus basis. The cheapest item on the menu was the least costly to produce – chicken tarragon. It tasted pretty awful. Unfortunately, when potential customers wanted to try the offerings, this is what they opted for. DISASTER!!! One day, however, a deli owner tried the fish (the costliest item), and he reported back to me that it was fantastic. More importantly, he could never serve fish before because of the strong cooking smell and freshness issues, but sous vide cooking in a pot of boiling water solved these problems. He was therefore the only deli in the area to be able to offer fish, which made him stand out and feel proud. Jobs to be Done! The value created had NOTHING to do with the price of the ingredients. Understand the real sources of value that you create by accomplishing the customer’s Jobs to be Done. You might be able to position yourself in entirely new ways.

Pricing isn’t about setting numbers. It’s about translating value. Most teams think pricing means picking a number. It’s not. Pricing is how you tell the story of your value. And that’s why Product people should be especially attentive and ideally lead the pricing discussions. ⛔ Underprice, and you confuse customers about what your product is worth. ⛔ Overprice without the value to back it, and you break trust. The real job of pricing is to make people believe in your value. Mini-checklist for value-aligned pricing ✅ Define your key outcome: what tangible result does your product deliver? ✅ Map that outcome to a user’s success metric (for example, revenue saved or time reduced). ✅ Choose a metric that reflects that success; your pricing should scale with it. ✅ Test perceived fairness with 5–10 target customers before finalizing. Pricing starts with empathy: understanding what people value, not what they’ll pay. #ValueBasedPricing #SaaS #Monetization #ProductManagement

𝗚𝗿𝗲𝗮𝘁 𝗱𝗲𝘀𝗶𝗴𝗻 𝗶𝘀 𝘂𝘀𝗲𝗹𝗲𝘀𝘀 𝗶𝗳 𝘆𝗼𝘂 𝗰𝗮𝗻’𝘁 𝗮𝗳𝗳𝗼𝗿𝗱 𝘁𝗼 𝗯𝘂𝗶𝗹𝗱 𝗶𝘁 > 𝗣𝗮𝗿𝘁 𝟭 𝗼𝗳 𝟮 🏗️ 💰 Most people think architectural services end at the design. But for me, design is only part of the job - the other part is protecting the Client’s bottom line. Here is how I keep project costs on track from day one. Costs are a big constraint to any project, and managing them while still delivering the Client brief can be difficult to achieve. I’ve pulled together some real life tips on how to do this, using tried and tested methods learnt over the years. From my very first conversations with new Clients we are talking about project costs and how to ensure their project can be delivered on budget. This is especially relevant as material costs have skyrocketed in recent years. I try to encourage clients to get cost estimates applied at early stages so the design can be sense checked against realistic costs. Most Clients are often surprised at how much things cost to build properly, so savings are made throughout the life of the project. Here’s the 4 Phase process I often follow for controlling costs on Client projects - the design is usually amended at each stage to manage costs. 𝗕𝗲𝗳𝗼𝗿𝗲 𝗣𝗹𝗮𝗻𝗻𝗶𝗻𝗴 𝗣𝗲𝗿𝗺𝗶𝘀𝘀𝗶𝗼𝗻 – 𝗖𝗼𝘀𝘁 𝗘𝘀𝘁𝗶𝗺𝗮𝘁𝗲 𝟭 Early costs obtained from a Quantity Surveyor, once a preliminary sketch scheme is agreed, before Planning Permission. This means the design can be amended to save costs. Sometimes projects are cancelled at this stage if costs are too high. 𝗔𝗳𝘁𝗲𝗿 𝗕𝘂𝗶𝗹𝗱𝗶𝗻𝗴 𝗥𝗲𝗴𝘂𝗹𝗮𝘁𝗶𝗼𝗻𝘀 – 𝗖𝗼𝘀𝘁 𝗘𝘀𝘁𝗶𝗺𝗮𝘁𝗲 𝟮 Updated costs from the Quantity Surveyor once the technical design has been completed, after Building Regulations submission. This allows further amendments before obtaining contractor prices. Stage 4 costs are usually higher than Stage 2 due to detailed design. In a couple of days, I'll dive into how we further refine cost estimates and keep a project on track before work starts on site. The images are of initial Stage 2 drawings for an extension and full house retrofit to a terraced property in Sheffield using bio-based materials. We used the method above, with Wayne Fletcher providing cost advice that helped guide the design and manage costs. I don't just draw buildings; I manage investments.