Value is a weird, slippery thing. We all know it when we see it, but try to define it on paper and most business owners just start stuttering about "quality" or "customer service."
Alex Hormozi changed that. Basically, he took the abstract concept of what makes someone pull out a credit card and turned it into a math problem. If you've ever wondered why people gladly pay $10,000 for a cosmetic surgery but complain about a $50 gym membership, you're looking at the alex hormozi value equation in action.
It’s not just theory. It’s a literal map for making an offer so good people feel "stupid saying no."
The Four Pillars of the Alex Hormozi Value Equation
The equation looks like a fraction. On the top, you have the stuff that makes people want to buy. On the bottom, you have the "costs" that kill deals. To make your value skyrocket, you want to increase the top numbers and crush the bottom numbers toward zero.
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The formula looks like this:
$$\text{Value} = \frac{\text{Dream Outcome} \times \text{Perceived Likelihood of Achievement}}{\text{Time Delay} \times \text{Effort & Sacrifice}}$$
1. Dream Outcome
This is the "after" picture. It’s the six-pack, the million-dollar bank account, or the feeling of finally being the "cool" person in the room. Honestly, most entrepreneurs get this wrong because they sell features. Nobody wants a "12-week workout plan." They want to look good naked.
If your marketing focuses on the tool instead of the destination, you're capping your value. You have to paint a vivid picture of the transformation. How does their life change? How do their peers perceive them?
2. Perceived Likelihood of Achievement
This is about certainty. People are terrified of being scammed or failing. If I promise you a billion dollars but you think there's a 0% chance I can deliver, the value of my offer is zero.
You boost this lever with social proof. Testimonials, case studies, and "done-it-before" authority are the currency here. This is why a world-renowned surgeon can charge 10x more than a medical student. You aren't just paying for the surgery; you're paying for the 99.9% certainty that you won't die on the table.
Why the Bottom Half of the Equation Wins
Hormozi argues that most people focus way too much on the top half. They make bigger and bigger claims. "I'll make you a millionaire!" "I'll make you a billionaire!"
But the real "Grand Slam" offers are won in the denominator.
3. Time Delay
How long between the moment I pay you and the moment I get my "Dream Outcome"? The longer the wait, the lower the value.
Think about the difference between a gym and liposuction. Both offer the same dream outcome (losing fat). The gym takes 12 months of daily grinding. Liposuction takes two hours. Because the time delay is virtually zero with surgery, people are willing to pay a massive premium.
If you can find a way to give your clients a "quick win" in the first 24 hours, you've already won half the battle.
4. Effort & Sacrifice
This is the "suck" factor. What do I have to give up? What do I have to do that I hate?
If your solution requires me to wake up at 4:00 AM, eat only kale, and stop seeing my friends, the value drops. People are inherently lazy—or, more politely, they value their own energy. This is why "done-for-you" services always sell for more than "do-it-yourself" courses.
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When you decrease the effort, the value approaches infinity. Imagine a pill that makes you fit overnight while you eat pizza. That would be the most valuable product in human history because the bottom half of the equation (Time and Effort) is zero.
Real World Examples: Uber vs. Taxis
Let's look at a classic example Hormozi often references. Why did Uber destroy the taxi industry?
- Dream Outcome: Get from A to B. (Same as a taxi).
- Perceived Likelihood: High. You see the car on the map coming toward you. (Taxis are a gamble—will they show up?).
- Time Delay: Decreased. You don't have to call a dispatcher; you just tap a button.
- Effort & Sacrifice: Almost zero. No waving your arms in the rain, no awkward cash handling.
Uber didn't necessarily make the cars faster. They just manipulated the variables of the alex hormozi value equation to make the perception of the service much more valuable than a traditional cab.
How to Apply This to Your Business Today
You don't need to be a math genius to use this. You just need to be honest about where your offer is "leaking" value.
Audit your current offer:
Take a look at what you’re selling. Are you making a huge promise (Dream Outcome) but asking for six months of work (Time Delay) and a total lifestyle overhaul (Effort)? If so, your value is low.
Flip the script:
Instead of just promising more "results," try to find ways to make those results happen faster. Can you provide templates so they don't have to start from scratch? Can you offer a "concierge" service where you do the boring parts for them?
The 10x Test:
Hormozi suggests asking: "How would I provide this value if I had to charge 10x more?" Usually, the answer involves moving into "done-for-you" territory or adding insane levels of certainty through guarantees.
Actionable Next Steps
To actually use the alex hormozi value equation to grow your revenue, start with these specific moves:
- Identify the "Anti-Value": List every single thing a customer has to do or give up to use your product. These are your value-killers.
- Create a Quick Win: Find one tiny part of the dream outcome you can deliver within hours of the purchase.
- Stack Proof: If you don't have 10+ case studies, your "Perceived Likelihood" is hurting you. Go get those testimonials, even if you have to work for free to get the first few.
- Trim the Fat: Look at your delivery process. If a step doesn't directly help the customer reach the outcome or feel certain, cut it. Complexity is a value-killer.
By shifting your focus from "how much I charge" to "how much value I'm creating," you stop competing on price and start competing on the actual transformation you provide. That's how you move from a commodity to a category of one.