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  • 12 Forms of Value

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    No, this isn't one of those click bait things.

    I am a huge believer in business being simple. And the Personal MBA by Josh Kaufman is one of my favorite books, and my favorite business book, because it is so focused on being simple and straightforward. This is an excerpt from that book that I re-read periodically because I love it.

    As much as everyone's businesses are unique, there are still a few underlying rules that pertain to all of them. One of them is the creation of value (you can find the original here):

    To provide value to another person, it must take on a form that they are willing to pay for. Economic Value usually takes one of the following 12 Standard Forms of Value:

    1. Product — Create a single tangible item or entity, then sell and deliver it for more than what it cost to make.
    2. Service — Provide help or assistance then charge a fee for the benefits rendered.
    3. Shared Resource - Create a durable asset that can be used by many people, then charge for access.
    4. Subscription — Offer a benefit on an ongoing basis, and charge a recurring fee.
    5. Resale — Acquire an asset from a wholesaler, then sell that asset to a retail buyer at a higher price.
    6. Lease — Acquire an asset, then allow another person to use that asset for a pre-defined amount of time in exchange for a fee.
    7. 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.
    8. 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.
    9. 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.
    10. Option — Offer the ability to take a pre-defined action for a fixed period of time in exchange for a fee.
    11. 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.
    12. Capital — Purchase an ownership stake in a business, then collect a corresponding portion of the profit as a one-time payout or ongoing dividend.