This Equation Changed My Life

How to understand your offer's value

What if I told you that a simple equation would change how you see the world, would you believe me?

Well, check this out: The Value Equation

The Value Equation

I used this equation to increase wholesoul’s income by more than 600% between 2022 and 2023.

And it all happened after I learned how to describe value.

Now, I use this mental model to calculate, negotiate, and communicate the value of my products and services.

What’s a mental model?

A mental model is an intellectual lens that helps you see and think about the world more clearly.

This mental model has 4 variables: Dream Outcome, Perceived Likelihood of Achievement, Time Delay, and Effort & Sacrifice.

Each of these 4 variables can used to help you make better business decisions.

Where Did It Come From?

While I was performing a Yiddish Opera in Toronto 3 years ago, I came across this equation in the book $100M Offers by Alex Hormozi.

It changed my life.

Alex Hormozi is a phenomenally successful businessman, author, speaker, content creator, and investor. His business, Acquisition.com, focuses on helping businesses with $1M-$5M of revenue to scale to $10M-$30M.

I am now currently reading his book $100M Leads, and I couldn’t recommend it enough.

In this next newsletter, I will break down each variable of the Value Equation and how I use them it to grow my business.

If interests you, keep reading.

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Dream Outcome

As musicians, it is our job to create soundtracks for unforgettable moments in peoples’ lives.

If we do it right, we can even make their dreams come true.

So, when I communicate with my clients, my #1 priority is to discover their dream outcome. I try to never assume what they want.

I ask questions about themselves, and I actively listen. Then, they tell me their dream.

The bigger the dream, the bigger the paycheck.

Story

wholesoul played a wedding at Amangiri for the founder of a well-known shoe company a couple of years ago.

They wanted to:

• Arrive on camels among smoke bombs

• Have a 9-piece orchestra play very specific music, some of it with a DJ

• Have a space cowboy disco with 2 roaming violinists and 1 saxophonist.

The unusual nature of this Dream Outcome required a lot of work from Whole Soul Music LLC.

To this day, it is still our highest-yielding contract because we delivered a demanding vision, and we knew how to charge accordingly.

Perceived Likelihood of Achievement

Emphasis on perceived.

The more you deal with clients, the more you will see that trust exists on a spectrum.

Some clients know all about you, and they trust you completely.

Others clients do not even know your name—they just find you randomly on the internet lol. This means that they do not know about your integrity, your professionalism, or your skill.

This where marketing helps you.

To increase the perceived likelihood of achievement in the minds of your clients, you must offer services that will put their mind(s) at ease. Here are some examples:

• 30-day money back guarantees

• Periodic update calls or emails to show progress

• On-call assistance or support

• Testimonials from past happy clients. The more the better

Story

A couple of months ago, I was communicating with a wedding planner that found us through a referral. We had never worked with this planner before.

After a brief discovery call, I sent a quotation, and it was quickly approved.

But then there was the contract.

A day after receiving the contract, the wedding planner proposed a situation I had not considered before…

The planner was worried that wholesoul had the power to cancel on their client.

This is something we would never and have never done.

But, how was she supposed to know that? We were just some quartet that someone recommended to her.

Even though we were far in our contract negotiations, this is a point where everything could have fallen through.

This was an opportunity to build trust. To build Perceived Likelihood of Achievement

I sat and thought deeply for about 20 minutes.

Here’s what I said:

And here was her response:

There you have it: building trust builds Perceived Likelihood of Achievement.

To build trust, address your client’s concerns. Validate them. Give more context to your position. And, most importantly, try to engineer solutions that work for everyone.

Time Delay

The faster you can solve your customer’s painful problem, the more valuable your offer is.

It is simple, but it is not easy.

Think about it. This is why Amazon is a multi-trillion dollar company! It offers a yearly subscription that enables you to receive packages right to your door within 2 days—sometimes even the same day.

Story

With wholesoul, I have been mildly obsessed with building systems that facilitate speed in our business.

I have noticed that the faster we can deliver quotations, the faster money hits our bank account.

Anecdotally, our biggest clients deal with the tightest timelines. The shorter the timeline, the less price-sensitive they are. It gets to a point where they just wanna throw money at the problem and make it go away.

It is my business to get a bag ready to catch it.

Speed is the simplest way to increase the value of your offerings. Get good at what you do, build systems to help you go faster, and then find ways to automate the process.

Effort and Sacrifice

Bigger Dream Outcomes require more sacrifice.

Effort can be leveraged with hiring, systems, and tools. Effort = Shot-term action with a specific goal in mind?

Sacrifice though…sacrifice is inevitable. There is always a trade-off with every decision. Your goal is to reduce sacrifice as much as possible.

The most common sacrifice musicians make is one with their time. We cannot be in 2 places at once, so we often have to sacrifice one gig to perform another one.

When communicating with clients about price, you must remember that reserving a date and time is worth money. That’s why we have a retainer fee. Saying “yes” means saying “no” to everything else you could be doing instead.

Always remember this.

Story

I played on the Grammys this year with Raye. When it comes to award show schedules, everything is LAST-MINUTE.

In order to play for the Grammys, you have to block a bunch of days off for rehearsals and camera blocking. They then figure out time slot assignments for each act, and then extra dates are released.

This year’s Grammy rehearsal and camera blocking schedule changed multiple times.

The original call schedule conflicted with another gig that I already had on the books. I wanted to play the Grammys, so I reached out to that contractor and sacrificed that gig.

And then the dates changed.

After the change, I had ANOTHER gig conflict. I called that contractor and sacrificed that gig.

It gets worse. The new change freed up my previous conflict, so I sacrificed that first gig for no reason.

I sacrificed 2 gigs for 1, and I actually could have done 2 of them.

This is the sacrifice of being a freelance musician. This is also why I am actively building businesses in addition to my freelance career.

Never forget: locking up a date for a client has value because you are sacrificing time to serve your client.

Takeaways

Here’s the Value Equation again. It is powerful if you think through it.

Here are some extra insights to keep in mind:

• Big Dream Outcomes mean nothing if the Perceived Likelihood of Achievement is low.

  • For example, let’s say a client’s Dream Outcome is worth $1,245,924.64. Let’s also say that they are a bit…unsure of your ability to deliver. If the Perceived Likelihood of Achievement in the mind of the client is only 40%, the actual value of the Dream Outcome decreases by 60% to $498,369.86. That is probably what they would view as “fair” for a fee. Failing to convince your client of your Likelihood of Achievement will cost you $747,554.78. Aside from money-back guarantees, you can build credibility through creating compelling marketing materials (content) and generating social proof (content and testimonials).

• Products and services that have lower Time Delay and/or Effort & Sacrifice are more valuable. Let’s test this thesis by looking at a few examples:

  • Fast Food vs. Sit-Down Restaurants vs. Cooking at Home

    • The fast food industry is more valuable than sit-down restaurants because their Time Delay is less. The Effort & Sacrifice for sit-down restaurants is much less than Cooking at Home.

    • Take a look at TXRH (sit-down) vs. MCD (fast food):

    

    $10.74B Market Capitalization

    

    $226.49B Market Capitalization

    McDonald's is 21 times more valuable than Texas Roadhouse by Market Cap.

  • 20-minute weight-loss pill

    • TAKE ALL MY MONEY.

    • Joking aside, the Time Delay and Effort & Sacrifice of taking a pill vs. going to the gym is a no-brainer

  • Streaming vs. Theater.

    • The Effort & Sacrifice of streaming is much lower than going to the theater. The minimum Effort & Sacrifice to stream on Netflix is insanely low. It only took me 16.24 seconds to go from a locked phone to watching a new movie. Now think about everything involved with going to the theater…

    • This is why streaming companies are eating theater companies!!! Streaming is faster, easier, and cheaper than going to the movie theater by multiple orders of magnitude.

    • Look at the market caps of AMC (theater) vs NFLX (streaming):

    

    $1.17B Market Capitalization

    

    $468.78B Market Capitalization

    Netflix is 468 Times More Valuable Than AMC by Market Cap. IT’S NOT EVEN CLOSE.

I can keep going, but I think that’s enough for today.

Thanks for reading, as always.

Writing is hard. I thought it would get easier, but it hasn’t.

I sincerely hope it was worth your time. I spend a lot of time thinking, reading, researching, and writing for these newsletters.