Guy Reams (00:01.856)
is day 351, assigning a price to value. So today, been a lot of internal discussions about this idea of how to set pricing. This is probably something that every startup struggles with and I'm no exception. But that really begs the question, how valuable is what you're providing? It seems to me like in order to find something
in order to price something, you have to know what the realized value is. I think this applies to more than just software and startups. This also applies to you yourself. If you are a person that is trying to get paid money to perform a service for somebody, then you also have to be worried about what value that you are producing.
If you're going to ask for a raise from your job or if you were to be in an interview and they ask you, well, how much money do you want to make? You need to really understand your value proposition so that you can understand what price to set or what price to expect.
But this concept of value proposition is a bit elusive. So I spent some time today with my partner and some people here in the office debating this issue. And I think we've came up with four very distinct categories for identifying value. So what is a value model? Now, I don't think it's one or only one of these things. It could be one or many or a combination of all the above.
But there's general four areas that I think I've come to the conclusion on first. You are providing value if you can provide incremental sales, higher conversion rates, better price realization. So you're improving revenue. So if you were able to help a customer increase their revenue, increase their sales, convert more customers, or keep their prices high,
Guy Reams (02:19.126)
That is a way that you are helping to improve the revenue picture. That would be valuable. So you can see why a salesperson who's really good gets paid more because they are directly adding value to the business that they're working for. Second is costs down. So just like revenue needs to go up, cost needs to be going down. This would be a margin issue.
the smaller amount of money that a company spends to get the work done, the more money they make because their costs are down or lower. So can you save them labor? Can you replace or get rid of tools that are expensive? Can you eliminate or reduce waste? All of these things are things that cause cost to incrementally go up. So can you reduce cost?
When I was a young person, I had a job and it was a good job. It was a computer teaching job. And there was another person that was teaching, getting a lot more money than me. They were teaching more advanced courses and this person was charging them a lot of money to do this. So I asked the owner of the business, if I learned how to teach those courses, could you hire me instead? He's like, well, I'm not sure I would have a reason to do that.
And I said, what if I did it for half the price? And he said, well, if you could do that, I would hire you tomorrow. So in that case, I was able to provide the same service, but at half the price. And by the way, that did work. I was able to get that job.
The third is risk risk being reduced This is the one I touched on a couple of days ago But can you help them produce a product or a service that has fewer defects? less compliance exposure less downtime or other potential risks Risk has become a larger and larger ingredient or equation in modern business and in our own lives
Guy Reams (04:33.89)
We are always being exposed to risk. Most of us accept the risks, but statistics show that people value risk reduction. For example, some of the best selling cars in the market are those that have the best safety protection mechanisms. And we are also learning that in vehicles, safety sells.
Vehicle, more more manufacturers are putting their base safety features in their lowest end model cars simply because people are buying for safety. Reducing risk is something that people will spend money on. The fourth, I think, is time. People are always worried about getting to market faster. For example, right now, I am developing software at a very rapid pace. I mean, we're going very fast.
If somebody knocked on my door and said I could get that same software done faster I Would have to listen to what they had to say because Honestly, that would be one of the biggest factors for a buying decision was how can I? Reduce time this is when I find out how many salespeople are actually listening or reading my blogs
because tomorrow morning after they get this, they'll say, hey, guy, I happen to have a solution that can save you a lot of time. Hats off to them if they do that, by the way. I'll pick up the call. But anyway, can you reduce the cycle time? Can you get them to market faster? Can you get the conversion to dollars quicker? Cash flow is always king.
So can you reduce the amount of time it takes for them to get cash? So these are the four, I think, building blocks for finding value. If you sit around the whiteboard and talk to your colleagues or whatever, and you are not able to articulate a clear answer to one of those four areas, then you're probably not going to have a market viable product. If you're sitting here wondering why your boss has not given you a raise,
Guy Reams (06:53.9)
and you cannot answer those four questions, one of those four questions very clearly, then you really have no right to ask for a raise. You have to be able to articulate how you are providing value back to the business. Now there's a lot of different ways to calculate how to apply value and how to figure out how to get a cost to value. I mean, we could probably spend hours talking about that alone.
But I think this is enough for now, is I think about how to make myself more valuable. How do I make my company more valuable? Or how do I teach my children how they can become more valuable? It's really important to think of these four key levers. Those four levers being how can I help others increase their revenue, reduce their cost, reduce their risk, and decrease the amount of time that it's taken for them to do an effort.