How much does it cost?
Before we can even begin to discuss the price (how much to charge), it's important to understand what something costs to make. And the answer isn't always obvious.
If you want to know how much it costs to make the first one, to scale the operation up, to get the machinery, the systems, the staff… it might be a million dollars for a piece of toast or a billiard ball. Perhaps ten million.
Or the question might be: How much does the last one off the assembly line cost? After the entire system is up and running, after everyone's been paid by everything else that was produced today—the last unit the shift produced, what's the marginal cost of that one? In the case of our mythical billiard ball, it might be just a nickel.
But maybe we're talking about this particular unit, the one that was hand sold, that was customized, that was delivered to precisely the right spot at precisely the right time—all of that just in time customization and risk reduction cost a fortune.
And what about the externalities? What does it cost the environment, the community, the team?
Finally, perhaps we ought to consider the opportunity cost. How much better would it have been for us to spend our time and our capital and our risk to do something else, something more useful or profitable?
In the long run, all we need to do is divide our total costs by the total number of units we made. But in the long run, we're all dead. In the short run, the cost depends on what sort of decision we're trying to make.