How much standard value is lost through discounting and which guardrail should change?

Short answer

Use evidence that can survive a second reader.

1. Total standard value equals standard contract value multiplied by deal count.
2. Realized value equals realized contract value multiplied by deal count.
3. Absolute leakage equals total standard value minus realized value, with a floor of zero.
4. Leakage rate equals absolute leakage divided by total standard value.
5. A rate at or above 20% is High leakage; 8% to under 20% is Review; below 8% is Within guardrail.

Worked example

See the decision in a fictional case.

Use Pricing AuthorityInspect the full methodTake it into the matching Petrichor work

What this answer cannot establish

• Management estimate only; not financial or accounting advice.