Let’s say you run a lemonade stand. You sell lemonade in the summer on 12th Main Road, Indiranagar, BLR.

A glass of lemonade costs ₹30, and customers are happy to pay.

When you break down your costs, they’re surprisingly low.

  • 1 kg of lemons costs around ₹128, giving you roughly 32 lemons, or ₹4 per lemon. One lemon makes 4 glasses of lemonade, so the cost per glass is just ₹1.
  • Water? ₹75 for a 20L Bisleri can. For 250ml per glass, that’s less than ₹1.
  • Salt and sugar are negligible—let’s estimate ₹0.5 per glass.
  • The most expensive part? The cups, at ₹4 each.
  • Add ₹1 for some miscellaneous things I am missing.

In total, each glass costs around ₹7.5. You’re selling it for ₹30, a 4X markup.

Making one glass of lemonade costs 30 seconds. Even if you charge ₹1000/hr (20LPA) for your time, your labour costs are ₹8.33.

But despite this, people don’t think they’re overpaying. Why?

Because they’re not buying just the ingredients. They’re paying for the value you provide by turning simple ingredients into a convenient, refreshing drink, ready when they need it. They’re thirsty, hot, and looking for a quick way to quench that thirst. You’ve created a solution to their immediate problem, and that’s where the real value lies.

This process—taking raw materials and transforming them into a final product that fulfills a need—happens everywhere. Think about other products:

  • Yarn costs ₹100, but a sweater starts at ₹499.
  • Fabric might cost ₹80/meter, but a pair of pants starts at ₹699.
  • AI tools cost ₹5000/mo, but businesses pay consultants ₹50K/mo to use them on part time basis.

The raw materials are cheap, but the product becomes valuable because it removes effort, and time delay. Whether it’s convenience, craftsmanship, or something else entirely, value is created when you take what’s basic and transform it into something that’s even more useful.

Let’s consider your lemonade stand again. Now, let’s say, you invest in tools that allow you to juice lemons faster or in bulk, cutting down the time it takes to prepare each glass. Or maybe you buy a machine that takes all the ingredients, and outputs lemonade in a glass.

Suddenly, you can serve more customers with the same amount of effort, and you’re reducing your per-glass cost while keeping the price steady at ₹30.

You’re not just creating value for your customers by offering convenience; you’re also capturing more of that value for yourself.

Your labour is more efficient, which means you’re able to increase your profit without even raising prices.

This leads to a situation where everyone wins. You don’t need to increase prices for your customers, but on the other hand, you are increasing your profits because you’re able to produce and sell more lemonade in the same amount of time.

Maybe with all the saved time, you can also start offering iced teas to your customers, that came to your stand with their friend, but didn’t want to have lemonade.

Increasing your efficiency becomes a non-zero-sum game—everyone walks away better off.

And yes, part of what customers pay for is the labour you put in. After all, it would cost them more time and effort to make the lemonade themselves.

But your profitability doesn’t come just from charging for your time. It comes from the fact that you’ve invested in making your labour more efficient. Now, you can keep improving that efficiency, serve even more customers, and capture more value as your lemonade stand grows.