The Framework for the Perfect Offer
Jul 26, 2024Starting a business involves countless decisions, and one of the most vital is determining your offer's value proposition. How much effort should it take to create and deliver your offer, and what's the optimal price point? Shannon delves into these crucial questions in the latest episode of her podcast. Through a thoughtful framework, she helps entrepreneurs plot their offers on a continuum of effort versus price, guiding them towards finding scalable, profitable solutions.
Shannon begins by acknowledging the complexity of the discussion around margins, especially for those not well-versed in financial jargon. Margins are essential, but explaining them often involves intimidating formulas and equations. Her goal is to simplify this topic and offer practical insights into understanding and categorizing different types of offers based on two primary dimensions—effort and price.
Shannon introduces a familiar visual: a chart with vertical and horizontal lines intersecting to create four quadrants. This chart is a powerful tool used to evaluate the balance between the effort required to sell and fulfill an offer and its price or revenue potential. Here’s a deeper look into each quadrant:
In the first quadrant, low effort and low price, Shannon refers to this category as "mailbox money," a term commonly associated with passive income. While she refutes the notion of truly passive income, she emphasizes low-effort revenue streams, such as royalties, membership fees, and online courses. These methods require minimal ongoing work and don’t involve trading time for money.
In the second quadrant, high effort and low price, this represents offers that are time-consuming or costly to produce but generate limited revenue. Shannon labels these "cash guzzlers" because they drain resources without delivering substantial financial returns. Evaluating your ecosystem for cash guzzlers is crucial, even if they aren't immediately apparent. Identifying and eliminating or transforming these offers can significantly enhance your business’s overall efficiency and profitability.
In the third quadrant, high effort and high price, high-effort, high-price offers, such as bespoke services and premium products, can be very attractive. Shannon highlights these as "first-class experiences" or "white glove services." While they require significant effort and resources to deliver, the high revenue can justify their existence. For Shannon, this is her CFO services, providing personalized, high-touch support to a capped number of clients. The key to managing offers in this quadrant is maintaining a healthy balance between effort and reward, ensuring that the high cost of delivery is offset by equally high revenue.
In the fourth quadrant, low effort and high price, this involves low effort and high price, which Shannon describes as "scalable offers." These are the golden geese of business models—offers that require minimal effort to maintain while generating substantial revenue. Automation or less skilled team members can deliver these offers without compromising quality. Shannon provides an example with her "CFO on Demand" service, a low-effort, subscription-based offering that scales easily without significant increases in cost or effort.
Profitability stems from a clear understanding of your offers’ margins—specifically, the balance between the revenue they generate and the cost or effort to deliver them. Shannon advises regularly reviewing financials and aligning effort with earnings potential. This means focusing on scalable offers while carefully managing or phasing out cash guzzlers. To assist businesses, Shannon has introduced "CFO on Demand," an affordable service that provides expert financial oversight without hefty fees. This offer exemplifies her low-effort, high-value quadrant, providing valuable insights and support to business owners looking to optimize their offers for profitability.
Shannon’s framework offers a simple yet effective method to evaluate business offerings, promoting better decision-making around effort and price. By plotting offers onto the continuum, entrepreneurs can strategically focus on scalable, profitable models that maximize earnings while minimizing effort. Whether you're a seasoned business owner or a budding entrepreneur, this episode of "Keep What You Earn" provides valuable tools and insights to help you create the perfect offer. As Shannon aptly puts it, the key to growth and profitability is finding that golden balance between effort and reward.
What you'll hear in this episode:
05:08 Avoid high effort, low price cash guzzlers.
07:08 Maintain balance in high-effort sales offers.
11:03 Evaluate financials monthly, align time and energy.
If you like this episode, check out:
This Could Be the Most Expensive Sales Mistake You Make
Stop Doing This to Your Customers
How to Keep High Margins as a Franchisee
Want to learn more so you can earn more?
CFO On Demand click here
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Watch this episode and more here: https://www.youtube.com/channel/UCMlIuZsrllp1Uc_MlhriLvQ
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The information contained in this podcast is intended for educational purposes only and is not individual tax advice. Please consult a qualified professional before implementing anything you learn.
