FORMS OF VALUE FOR BUSINESSExcerpts from The Personal MBA by Josh Kaufman

Forms of Value• Product• Service• Shared Resource• Subscription• Resale• Lease• Agency• Audience Aggregation• Loan• Option• Insurance• Capital

Product• Create some sort of tangible item that people want.• Produce that item as inexpensively as possible while

maintaining an acceptable level of quality.• Sell as many units as possible for as high a price as the

market will bear.• Keep enough inventory of finished product available to

fulfill orders as they come in.

Product examples

Service• Have employees capable of a skill or ability other people

require but can’t, won’t or don’t want to do themselves.• Ensure that the service is provided with consistently high

quality.• Attract and retain paying customers.

Service examples

Shared resource• Create an asset people want to have access to.• Service as many users as you can without affecting the

quality of each user’s experience.• Charge enough to maintain and improve the shared

resource over time.

Shared resource examples

Subscription• Provide significant value to each subscriber on a regular

basis.• Build a subscriber base and continually attract new

subscribers to compensate for attrition.• Bill customers on a recurring basis.• Retain each customer as long as possible.

Subscription examples

Resale• Purchase a product as inexpensively as possible, usually

in bulk.• Keep the product in good condition until sale – damaged

goods can’t be sold.• Find potential buyers of the product as quickly as possible

to keep inventory costs low.• Sell the product for as high a markup as possible,

preferably a multiple of the purchase price.

Resale examples

Lease• Acquire an asset people want to use.• Lease the asset to paying customers on favourable terms.• Protect yourself from unexpected or adverse events,

including the loss or damage of the leased asset.

Lease examples

Agency• Find a seller who has a valuable asset.• Establish contact and trust with potential buyers of that

asset.• Negotiate until an agreement is reached on the terms of

the sale.• Collect the agreed-upon fee or commission from the

seller.

Agency examples

Audience aggregation• Identify a group of people with common characteristics or

interests.• Create and maintain some way of consistently attracting

that group’s attention.• Find third parties who are interested in buying the

attention of that audience.• Sell access to that audience without alienating the

audience itself.

Audience aggregation examples

Loan• Have some amount of money to lend.• Find some people who want to borrow that money.• Set an interest that compensates you adequately for the

loan.• Estimate and protect against the possibility that the loan

won’t be repaid.

Option• Identify some action people might want to take in the

future.• Offer potential buyers the right to take that action before a

specified deadline.• Convince the buyer that the option is worth the buying

price.• Enforce the specified deadline by taking action.

Options

Insurance• Create a binding legal agreement that transfers the risk of

a specific bad thing (loss) happening from the policy holder to you.

• Estimate the risk of that bad thing happening, using available data.

• Collect the agreed-upon series of payments or premiums.• Pay out the legitimate claims upon the policy.

Capital• Have a pool of resources available to invest.• Find a promising business in which you’d be willing to

invest.• Estimate how much that business is currently worth, how

much it may be worth in the future, and the probability that the business will go under, which would result in the loss of your capital.

• Negotiate the amount of ownership you’d receive in exchange for the amount of capital you’re investing.

Recap• Product - Create a single tangible item or entity, then sell and deliver it for more than what it cost to make.

• Service - Provide help or assistance then charge a fee for the benefits rendered.

• Shared Resource - Create a durable asset that can be used by many people, then charge for access.

• Subscription - Offer a benefit on an ongoing basis, and charge a recurring fee.

• Resale - Acquire an asset from a wholesaler, then sell that asset to a retail buyer at a higher price.

• Lease - Acquire an asset, then allow another person to use that asset for a pre-defined amount of time in exchange for a fee.

• Agency - Market and sell an asset or service you don’t own on behalf of a third-party, then collect a percentage of the transaction price as a fee.

• Audience Aggregation - Get the attention of a group of people with certain characteristics, then sell access in the form of advertising to another business looking to reach that audience.

• Loan - Lend a certain amount of money, then collect payments over a pre-defined period of time equal to the original loan plus a pre-defined interest rate.

• Option - Offer the ability to take a pre-defined action for a fixed period of time in exchange for a fee.

• Insurance - Take on the risk of some specific bad thing happening to the policy holder in exchange for a pre-defined series of payments, then pay out claims only when the bad thing actually happens.

• Capital - Purchase an ownership stake in a business, then collect a corresponding portion of the profit as a one-time payout or ongoing dividend.