The Value Equation

Provide more value. This exceptionally simple premise underpins every business and is the eternal pursuit of the entrepreneur.

Henry Ford brought us cheaper automobiles. Sara Blakely created hosiery that wouldn’t roll up. Mukesh Ambani brought cell service and wireless internet to rural India. They are all wealthy because their companies created enormous value for others, and they got to claim a cut of it.

But how can you conceptualize “value”? What levers can you pull?

Alex Hormozi has developed a simple formula that every entrepreneur should study.

Value = (Dream Outcome x Probability of it Occurring) / (Speed to Result x Cost of Implementation)

Is your offering a dream outcome? Or just a nice outcome?

Is your customer confident they’ll get the result? Or do your reviews, ratings, and reputation suggest otherwise?

Will they get results quickly? Or will they be waiting around for months/years? Can you manufacture a quick win?

In addition to the price tag, what costs does your customer pay for buying? Administrative costs, time, and the learning curve should all be accounted for.

How’s your offering look in the value equation?