Justification: Value Proposition

A good friend of mine provides growth capital to businesses ready to scale, so he sees a respectable share of businesses to sample from.

He once asked an entrepreneur:

DO YOU DESERVE TO BE IN BUSINESS?

I love this question and think about it all of the time! Here’s why: there is no shortage of clever tactics and techniques to extract money from customers without providing much (if any) value in return. The entrepreneurs behind these companies might make a lot of money (at least over the short term)—but they don’t deserve to be in business.

If that appeal to morality doesn’t move you, how about this: a sustainable and scalable sales system begins with providing something of value to customers. And the more value you create, the more capacity your engine has to create the desired output—sales.

But this wisdom, unfortunately, is not always applied.

There are some unscrupulous businesses that know damn well they don’t offer value, yet they continue to take customers’ money. There’s a special place in hell for them. But the vast majority of CEOs and entrepreneurs at least believe they have a strong value proposition that reflects a genuine benefit for customers.

Every business falls somewhere along two spectrums in this aspect.

1. One spectrum reflects the value proposition’s offer of utility (especially as perceived by the customer)

2. The other spectrum is the value proposition’s actual utility (as known by the seller)

You can see how these two spectrums line up in the following table:

Actual value is LOW

Actual value is HIGH

Seller’s

You’re basically offering nothing of value, but you aren’t aware of it. You’re basically offering nothing of value, but you aren’t aware of it.

You’re offering a lot of value to customers, but you have very little knowledge of what You’re offering a lot of value to customers, but you have very little knowledge of what that value is or how that value is or how to articulate it. to articulate it.

Seller’s

You’re offering You’re offering nothing of value. The difference is you know it, which basically makes you a crook. nothing of value. The difference is you know it, which basically makes you a crook. The promised land! The promised land!

Every business’s value proposition falls somewhere on this diagram.

As you move toward the right, you are offering more value to your customers. Kudos. Conversely, as you move over to the left, you fall into the offering-whales-some-water category.

Likewise, as you move toward the bottom, you have more knowledge of the value you are offering, which means as you move toward the top, you have no clue of the underlying value prop. Diagnosing where your value proposition falls in this quadrant is critical, so let’s look closer at each cell:

• In the top left, you’re basically offering nothing of value, but you aren’t aware of it. You’re like a snake oil salesman who genuinely believes you’ve got a magical elixir.

• In the bottom left, you are also offering nothing of value. The difference is you know it, which basically makes you a crook.

Perhaps a Bernie Madoff or Enron executive can be wedged right in that corner.

• In the top right, you are offering a lot of value to customers, but you have very little knowledge of what that value is or how to articulate it. A great example of this would be a company I recently worked with that experienced a huge spike in sales but had no understanding of what caused it. There are certainly worse places to be; however, there is always the risk that someone else will tap into the buyer’s motivation more effectively or that you won’t be able to repeat this success.

• The promised land is over in the bottom right. Here you’re providing exceptional value, and you know exactly what it is and how to articulate it.

How do you know where you fall in this diagram? You can start by asking yourself a few questions:

• Can I clearly articulate the benefits customers receive by pur

chasing my product or service in three sentences or less?

These are not the benefits you receive nor the features of your product or service but the benefits from the customer’s perspective.

• What does your sales team tell you about the perception of

the value prop? Do you have trouble finding salespeople? Do you have trouble keeping salespeople? Do you have trouble keeping the right kinds of salespeople? Remember, you may be able to sell a shitty product, but those sales will require you to hire shitty people who don’t care about what they’re peddling.

• Do sales get easier with time? Sales are a great sign of perceived benefit, but if they don’t get easier with time, it is likely that the value proposition is deteriorating for some reason.

These questions may be sufficient to get you in the right ballpark. The more accurate the diagnosis, the more effectively you can tinker with the components. Unfortunately, this is one of those areas that often requires a third party’s help, as it’s very difficult to be objective about a business that you live and breathe every day. (And, spoiler alert, optimizing value propositions is exactly the kind of thing I help clients with, so consider this a shameless plug for your humble author.)

Once you’re certain you are offering real value to customers or prospective customers, the next step in building a great sales system that paves the way for long-term growth is attracting them to your

business.