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Welcome Back to episode three of $100 million offers the audio edition and collab with the Game podcast. Today's episode is the most famous chapter that I wrote in the book the Value Equation.

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It's probably the most retweeted, the most

Alex Hormozi (0:15)

shared, the most posted concept. This concept changed my life and changed my businesses and I hope it does

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the same for you. And at the very end, I have

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a special call to action that would

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mean the world to me.

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And if you got value from this free content, it takes a second and

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again, it would mean the world. Section 3 Value Create your offer how to make offers so good people feel stupid saying no. Chapter six Value Offer the Value Equation we question all of our beliefs except for the ones we really believe in and those we never think to question. Orson Scott Card I want to be abundantly clear. The goal should be to charge as much money for your products or services as humanly possible. I'm talking heinous amounts of money. That being said, anyone can raise their prices, but only a select few can charge these rates and get people to say yes. From this point forward, you must abandon any notion you have about what's fair. Every enormous company in the world charges you money for things that cost them nothing. It costs pennies for the phone company to add an additional user, except they don't mind charging you hundreds of dollars per month for access. It costs pennies to manufacture pharmaceutical drugs, but they don't mind charging hundreds of dollars per month for it. Media companies charge advertisers a king's ransom for your eyeballs and it costs them next to nothing to get you to like kitten photos on social media. You need to have a big discrepancy between what something costs you and what you charge for it. It is the only way to become unreasonably wealthy. Many entrepreneurs believe that charging too much is bad. The reality is, yes, you should never charge more than your product is worth, but you should charge far more for your product and services than it costs to fulfill. Think up to 100 times more, not just two or three times more. And if you provide enough value, it should always still be a steal for the prospect. That is the power of value. It unleashes unlimited pricing and profit power to scale your company. For example, one of my private clients whose company I have equity in in our portfolio is in the photography space. Over two years, implementing the tactics outlined in this book, the owner was able to increase the average ticket from $300 to $1,500. That's a 5x increase? Gasp. Even cooler, they now spend less time per customer and have higher customer satisfaction. The 5x increase in average ticket 38x'd the profit of the business. It went from making $1,000 a week in profit to $38,000 per week in profit and continues to grow. And as a result, the company was finally able to continue to scale to multiple locations and provide meaningful work to great employees and a fun benefit. We were able to donate even more money to children's charities, which is something the owner and I have in common. Almost a million dollars at the time of this writing. But none of that would have been possible without figuring out what people valued most, tripling down on it and ruthlessly eliminating everything else. A 5x price increase may seem crazy to you, but clients voted with their dollars that what the company provides now is far better than what it did before Cracking value opens up the world of unlimited profit, impact and possibilities. Those who understand value are the ones who will be able to charge the most money for their services. The good news is that there is a repeatable formula that I have created. I've never seen it displayed elsewhere. To help quantify the variables that create value for any offer, I call it the Value Equation. Once you see it, you can never unsee it. It will operate in your subconscious, running in the background calling out to you. It's a new lens through which to see the world. The Value Equation Dream Outcome times perceived likelihood of achievement divided by time delay times effort and sacrifice Equals Value Free Gift 4Value Equation Bonus Tutorial and Free Downloads if you want to know how I break down business's core offering into something more valuable, go to acquisitions.comtrainings offers and select the Value Equation video to watch the short tutorial. I also included downloadable checklist My goal is to gain your trust and deliver value in advance. As such, it's absolutely free. Enjoy. So as you can see or here there are four primary drivers to value. Two of the drivers which are the top two parts of the equation you will seek to increase. The other two on the bottom of the equation you will seek to decrease. So 1 yay the dream outcome our goal is to increase 2 yay perceived likelihood of achievement our goal is to increase 3 boo perceived time delay between start and achievement. Our goal is to decrease 4 boo perceived effort and sacrifice Our goal is to decrease if you notice the questions in the last section that my father asked me, you'll see that corresponded with these pillars. What will I make Dream Outcome? How will I know it's going to happen? Perceived likelihood of achievement how long will it take? Time delay what is expected of me? Effort and sacrifice get the bottom to zero. In the beginning of my career I focused all my attention on dream outcomes and the perception of achievement, social proof, third party edification, etc. In other words, the top side of the equation. That's where beginner marketers make bigger and bigger claims. It's easy and it's lazy. But as time has gone on I have realized these larger than life claims are the easiest to establish and therefore less unique. After all, anyone can make a promise. The harder and more competitive are the time delay and effort and sacrifice. The best companies in the world focus all their attention on the bottom side of the equation, making things immediate, seamless and effortless. Apple made the iPhone effortless compared to other phones at the time. Amazon made purchasing a single click of a button and made purchases arrive almost immediately. Maybe by the time you read this they'll be sending drones to our doors within 60 minutes. Netflix made consuming television immediate and effortless. So the older I get, the more I have shifted my focus to the hard stuff, decreasing the bottom side of the equation. And I believe the better you do this, the more you will be rewarded by the marketplace. Final note. The reason this is a division equation and not addition is that I want to convey one key point. If you can make the bottom part of the equation equal to zero, you are golden no matter how small the top side is. Anything divided by zero equals infinity, which is technically undefined for math nerds. In other words, if you can reduce your prospect's true time delay to receiving value to zero, AKA you realize your immediate dream outcome and your effort and sacrifice is zero. You have an infinitely valuable product. If you accomplish this, you win the game. Given this postulate, a prospect would in theory purchase something from you and the moment their credit card was run, it would immediately become their reality. That is Infinite value. Imagine clicking the purchase button on a weight loss product and instantly seeing your stomach turn into a six pack. Or imagine hiring a marketing firm and as soon as you sign your document, your phone begins to ring with new, highly qualified prospects. How valuable would these products or services be? Infinitely valuable. And that's the point. I don't know if we entrepreneurs will ever get there, but that is the hypothetical limit we should all strive towards and why I structured the equation this way. Perception is reality. Perception is reality. It's not about how much you increase your prospect's likelihood of success, or decrease the time delay to achievement, or decrease their effort and sacrifice that in and of itself is not valuable. Many times they will have no idea. The Grand Slam offer only becomes valuable once the prospect perceives the increase in likelihood of achievement, perceives the decrease in time delay, and perceives the decrease in effort and sacrifice. A prime example of this happened on the London tunnel system. The biggest increase in rider satisfaction, AKA value, was never from faster trains to decrease wait times. Instead, it was from a simple dotted map that showed them when the next train was coming and how long they had to wait. The dotted map, which only cost a few million dollars, decreased the rider's perception of time delay and sacrifice, AKA being bored waiting more than actually making the trains faster, which cost billions of dollars to do. Isn't that cool? This is how we need to think about our products Logical versus Psychological Solutions Most people naturally try and solve problems using logical solutions, but the logical solutions have already been tried because they're logical. It's what everyone would try and do. As business owners and entrepreneurs, I increasingly approach problems to find psychological solutions rather than logical ones because if there were a logical solution, it probably would have already been solved, thereby eliminating the problem. All that remains are the psychological problems. Example inspired by Rory Sutherland, CMO of Ogilvy Advertising Any fool can sell a product by offering it for a discount. It takes great marketing to sell the same product for a premium. Make trains faster to increase satisfaction. Psychological solution Decrease the pain of waiting by adding a dotted map. Pay models to be the hostesses on the trip. People would wish it took longer to get to their destination. Logical make elevator faster. Add floor to ceiling mirrors so people are distracted staring at themselves and forget how long they were on the elevator. Logical solution make it cheaper. Psychological solution make fewer of them and raise the price, which would cause more people to want it. Often most logical solutions have been tried and failed. At this point in history, we must give the psychological solutions a shot to solve problems as such. As business owners, it's up to us to communicate these value drivers with clarity to increase the prospect's perception of these realities. The extent to which you answer these questions in the mind of your prospect will determine the value you are creating. Only then will we truly be able to realize the actual value of our product to the marketplace and by extension, the egregious prices we wish to charge. It's difficult to separate four value drivers from one another, as most vehicles combine many of these elements together, but I will do my best to isolate and clearly explain each one below. Number one Dream Outcome Our goal Increase People have deep unchanging desires. This is what marriages are lost over, wars are fought over and people willingly die for. Our goal is not to create desire. Our goal is simply to channel that desire through our offer and monetization vehicle. The dream outcome is the expression of that feeling and experiences the prospect has envisioned in their mind. It's the gap between their current reality and their dreams. Our goal is to accurately depict that dream back to them so they feel understood and explain how our vehicle will get them there. The dream outcome is simple. It's the getting there where the value gets enhanced or detracted. People generally, and our clients specifically want to be perceived as beautiful, to be respected, to be perceived as powerful, to be loved, to increase their status. These are all powerful drivers, but multiple vehicles may accomplish the same thing. Take the desire to be perceived as beautiful for example. There are a lot of things that touch on this desire. Makeup, anti aging creams or serums, supplements, shapewear, plastic surgery, fitness. All of these vehicles channel the desire to to be perceived as beautiful. And we further unpack the idea of a desire to be beautiful. We see that it may be a surface level declaration of a deeper desire to achieve higher status in one social group. The dream outcome value driver is most prominently used when comparing the relative value between two different desires being satisfied. In general, the dream outcome that most directly increases a prospect's status will be the one they value the most. As such, a prospect may value that entire category of vehicles that satisfy one desire more than another category that satisfies a different desire. For many men, making money is more important than being handsome. Why? Because money drives status for men more than being handsome does. So in general, they will value all offers that make them money more than offers that help them look good. I once heard Russell Brunson tell a story about this concept. He explained how his wife Colette, at first hearing the status concept, rejected it. She claimed she wasn't driven by status and would never want a Lamborghini. Instead, she favored her minivan. But after talking further, she revealed it was because driving a Lamborghini would decrease her status amongst her mom friends, while driving a minivan would show that she was a good mom. Increase in status so it's not about the money, it's about the status. The perceived increase or decrease in relative standing when compared to others socially or professionally. Talk in terms of things your prospect believes will increase their status and you will have your prospects drooling. Pro Frame benefits in terms of status gained from the viewpoint of others. When writing copy, you can make it that much more powerful by talking about how other people will perceive the prospect's achievement. Connect the dots for them. If you buy this golf club, your drive will increase by 40 yards. Your golf buddy's jaws will drop when they see your ball soar 40 yards past theirs. They will ask you what's changed? Only you will know. That being said, when comparing two products or services that satisfy the same desire, the value from the dream outcomes will cancel out since they are the same. It will be the other three variables that drive the difference in perceived value and ultimately price. For example, if we had two products or services that both help make someone beautiful, it will be the likelihood of achievement, time delay, and effort required that will differentiate the perceived value of each offer. Simply put, if two things make someone beautiful, what makes one worth $50,000 and another worth $5? Answer the extent of the other three value variables. Number two perceived likelihood of achievement. Our goal increase. This was the last of the variables that I added when trying to think through this framework a few years ago. I just felt like something was missing with only the other three. Then I realized people pay for certainty. They value certainty. I call this the perceived likelihood of achievement. In other words, how likely do I believe that it is that I will achieve the result that I am looking for if I make this purchase? For example, how much would you pay to be a plastic surgeon's 10,000th patient versus their first? If you're a normal sane person, a lot more. I mean, heck, you might even ask them to pay you if you're their first patient ever. So you can see even from this simple example that while the service you are receiving is technically the same, the only thing that changes is your perceived likelihood of getting what you want. Both surgeons take the same amount of time to do the surgery. If anything, the guy who has done it 10,000 times would likely get it done faster and still charge more. The more experienced surgeon has a track record of achieving a result which incentivizes their desirability. People value this perceived like it of achievement. Increasing a prospect's conviction that your offer will actually work for them will make your offer that much more valuable even though the work remains the same on your end. So to increase value with all offers, we must communicate perceived likely of achievement through our messaging proof. What we choose to include or exclude in our offer and our guarantees. More on this later. Number three Time delay. Our goal increase Time delay is the time between a client buying and receiving the promised benefit. The shorter the distance between when they make the purchase and when they receive value the outcome, the more valuable your service or product is. There are two elements to this driver of value, Long term outcome and short term experience. Many times there are short term experiences that occur en route to the long term outcomes. They happen along the way and provide value. It's good to understand both. The thing people buy is the long term value, AKA the dream outcome, but the thing that makes them stay long enough to get it is the short term experience. These are the little milestone a prospect sees along the way that shows them they are on the right path. We try and tie as many of these as possible into any service we offer. We want clients to have a big emotional win early, as close as possible to their purchase. This gives them the emotional buy in and the momentum to see it through to their ultimate goal. For example, it takes a while to add an extra $239,000 per year to a gym, but that's what they're buying. So once they have purchased we need to create emotional wins fast. One of the ways we do this is to get their ads live and get them to close their first $2,000 sale within their first seven days. By doing this, their decision to work with us is reinforced and they immediately trust us more. This makes them more likely to follow the rest of our systems and get to their ultimate destination. Fast wins Always try and incorporate short term immediate wins for a client. Be creative. They just need to know that they're on the right path and they made the right decision trusting you and your business. Let me give you another example. If I sell someone a bikini body, their time delay to realize that outcome may be 12 months or even longer. Along the way though, as they change their bodies, they may experience higher sex drive, more energy, and an increased community of friends. They aren't initially buying those things, but those things may become short term benefits that keep them in the game long enough to achieve their ultimate outcome. They buy the dream, but they stay for the benefits they discover along the way. The faster and more clearly you can demonstrate those benefits, the more valuable your service will be. For a weight loss customer, we would get them to meet someone else so they immediately had some social benefits from the program and we usually give them a more aggressive diet in the beginning. Why? Because we wanted them to have a big fast emotional win so we could get them to commit to the long term. This is also backed by science. People who experience a victory early on are more likely to continue with something than those who do not. That being said, having to wait 12 to 24 months to get you what you want is a long time when you can do liposuction and be done in an afternoon. This just shows one of the reasons people pay $25,000 for a liposuction with a tummy tuck, while people will barely pay $100 a month to join a bootcamp. But that's not the only reason, is it? That leads me to the last driver of Value, Effort and Sacrifice Pro Tip Fast Beats Free the only thing that beats free is fast. People will pay for speed. Many companies have entered free spaces and done exceedingly well with a speed first strategy. A few notable companies the MVD versus the DMV wait in line forever or pay $50. You can skip the line and get your license renewed privately. FedEx vs USPS when it absolutely positively has to be there overnight. Spotify vs slow free music Uber vs walking fast beats free. Many will always be willing to pay price for the value of speed. So if you find yourself in a market competing against free, double down on speed. Number four Effort and sacrifice. Our goal decrease. This is what it costs people and ancillary costs, AKA other costs accrued along the way. These can be both tangible and intangible. Using the fitness liposuction example, let's look at the difference in effort and sacrifice Fitness effort and sacrifice Wake up one to two hours earlier in the morning. Five to ten hours per week of time lost. Stop eating the foods you love, constant hunger, physical soreness, feelings of embarrassment and not knowing how to exercise Risk of injury, literal nausea, working out, meal prepping, new groceries, more expensive groceries, new clothing fear of gaining it back after all this effort aka impermanence, etc. Liposuction effort and sacrifice Fall asleep, wake up thin. Guaranteed be sore for two to four weeks. Massive difference, right? In fact, in looking at the marketing of plastic surgeons, these are the exact pain points they hit on when they say things like Tired of wasting countless hours in the gym? Tired of diets that just don't work? This is why when you sell fitness, you have to spend an hour arm wrestling a client to give over 1/10 or 1/100th of the amount of money they pay for surgery. There's just not a lot of perceived value because the perceived likelihood of achievement, the time delay to achievement, and the effort and sacrifice are so high. So even though the outcome is the same, the value of the vehicles are dramatically different, hence the difference in price. Decreasing the effort and sacrifice, or at least the perceived effort and sacrifice can massively boost the appeal of your offer. In an ideal world, a prospect would want to simply say yes and have their dream outcome happen with no more effort on their behalf. This is why done for you. Services are almost always more expensive than do it yourself because a person doesn't have to do all the effort and sacrifice. There is also a component of perceived likelihood of achievement difference as well. People believe that if an expert does it, then they will be more likely to achieve the outcome than if they try on their own. My hope is that you now have a foundational understanding of the components of value and how the interplay between each of the components creates or detracts from the value someone might be willing to pay. Putting it All Together As I said earlier, these elements of value don't happen in a vacuum. They happen together in combination. So let's look at a few examples that utilize all four components of value of once. In an effort to quantify the value, I'll rate them on a binary scale of 0 or 11 being value achieved, 0 being missing. Then I will add all four together to give you a relative value rating of a type of service. Our goal as marketers and business owners is to increase the value of the dream outcome and its perceived likelihood of achievement while decreasing the time delay of achievement and the effort and sacrifice one has to put in to get there. To start, I will do a side by side comparison of two vehicles with identical dream outcomes, Meditation and Xanax. Both offer the buyer relaxation, decreased anxiety and feelings of well being. I will demonstrate how the other three variables dramatically shift the value of delivering that dream outcome and ultimately the price Meditation versus Xanax so I'm going to read the chart below to compare relative scores on each of the four value drivers. Meditation Dream outcome Relaxation Decreased anxiety Feelings of well being score 1 out of 1 perceived likelihood of achievement low since most people get distracted and don't actually think they'll follow through with daily meditation score 0 out of 1 time delay long time to yield long term results some immediate benefits after 10 to 20 minutes, assuming you don't get frustrated, score 0.5 out of 1 effort and sacrifice Physical discomfort Numb body Limbs often Mental discomfort Feeling like you are failing constantly Time sacrifice. You have to set aside time every day to do this. Score 0 out of 1 overall value score for meditation Low 1.5 out of 4 Now let's look at Xanax. Dream Outcome Same as Meditation Relaxation Decreased anxiety Feelings of well being score 1 out of 1 perceived likelihood of achievement High since most people are confident that if they take the pill it will make them feel more relaxed score 1 out of 1 time delay 15 minutes for effects to be felt score 1 out of 1 effort and sacrifice swallowing a pill score 1 out of 1 overall value score high 4 out of 4 and that is why Xanax is a multi billion dollar product. While I know of almost no multi billion dollar meditation businesses value, I'm not here to argue about whether meditation is better than Xanax. Obviously it is, but that doesn't mean it's perceived as more valuable. This is also the reason that supplement industry 123 billion according to Grandview Research is twice the size of the health club industry 62 billion according to HRSA. They both accomplish the same perceived objectives, being healthy, losing weight, looking good, increasing energy, etc. But one is perceived as more valuable because it has lower costs. People are more willing to pay $200 for supplements than they are for a $29 per month membership. Taking a pill or drinking a shake is so much faster and easier than going to the gym every day. Hence valued. Crazy world we live in and you can either sit there and make complain posts about how people ought to be a certain way, or you can take advantage of the way people are and capitalize. This book is for those people who want to be victors, not victims of circumstance. You can either be right or you can be rich. This book is for getting rich. If that bothers you, you can put this down and go back to arguing against human nature. Hint you're not going to change it now. That being said, knowing what people value versus what is good for them is key. It means you can find ways to monetize the things that people value in order to give them what they really need. Win. Win. You can make your dent in the universe while making a profit.