First-Hand Pricing Power

Education2 years ago
Question: Would you shrug away a 10% increase in price on a service you use?
"The single most important decision in evaluating a business is pricing power. If you’ve got the power to raise prices without losing business to a competitor, you’ve got a very good business. And if you have to have a prayer session before raising the price by 10 percent, then you’ve got a terrible business." - Warren Buffett
As we've mentioned many times, pricing power is the holy grail in business.
To run Titan as a business, we have to pay several service providers: from legal counsel to trading infrastructure partners. Notably, we are also customers of a few Titan portfolio companies (small world, eh?).
Recently, we just got a notification from Twilio that they are increasing the price of their "SendGrid" email product by 12%. It's an email tool we use to send you confirmations for your transfers, referrals, etc.
We are focused on building our own financial products for you, not our own in-house email services. There are alternatives to Twilio, but it's a small % of our overall costs. Plus we'd run the risk of service downtime if there were any migration hiccups. So we just shrugged when we got the price hike alert.
"OK, guess we'll pay 12% more. It'd be a hassle to spend time or money trying to switch to another provider." This is pricing power.
Similarly, we use Amazon Web Services to store documents and data securely. We use Google Drive to collaborate across documents and spreadsheets. You catch the drift.
Pricing power is often something you can evaluate for yourself. Would you shrug away a 10% increase in price on a service you used? If so, it's probably a good business.
Be on the lookout for them. They are gems.

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