Ramit Sethi is founder of iwillteachyoutoberich.com and New York Times bestselling author of I Will Teach You To Be Rich, a book that outlines a six-week program to financial independence.

Here’s an overview of what you’ll learn throughout the program.

In Week 1, he covers how to pay off your debt, handle your credit cards effectively, improve your credit history, and why doing all of that’s important.

In Week 2, he covers setting up no-fee bank accounts that pay interest, and how to negotiate your way out of ridiculous bank fees.

In Week 3, he covers opening up both 401k and Roth IRA retirement accounts, even if you only have $50 to start.

In Week 4, he covers how to figure out how much you’re currently spending, a few big ways to cut your spending, and how to make your money go where you want it to go.

In Week 5, he covers how to automate all of your financial accounts so that they work together nicely and make your life easier.

In Week 6, he covers how to get the most out of the stock market with very little work.

I love the fact that there’s action steps at the end of each chapter. They demonstrate that this book isn’t just about getting good information, but rather using that information to improve your financial life.

There are many personal finance books out there that teach you how to invest. But I haven’t found one that teaches you how to negotiate your way out of bank fees, negotiate lower credit card interest rates, and setting up all of your financial accounts to work together automatically – until I read this book.

In fact, if you negotiate your way out of just one bank fee, this book will have paid for itself.

Although the book is primarily written for people in their twenties and thirties, most of his tactics are relevant no matter what your age is.

Some may find his writing style to be a bit insulting, rude, or offensive. But if you can get past that and focus on the message, his actual advice on managing your money is top-notch.

You don’t need a fancy finance degree in order to get rich. By the time you finish this book, you’ll know more about managing your money effectively than 90 percent of the people out there. And by taking the action steps, you’ll be wealthier than them, too.

Josh Kaufman is the founder of PersonalMBA.com and author of The Personal MBA, a book that provides “A World-Class Business Education In A Single Volume.”

After graduating from college, Josh took an offer to become assistant brand manager at Proctor & Gamble. Since his new job required a solid understanding of business, he considered enrolling in an MBA program.

But since it didn’t make sense to pursue a credential in order to get the kind of job that he already had, he decided to skip business school. He didn’t, however, skip the business education. Rather, he hit the books, and created his own “Personal” MBA.

But as time went on during his career, he realized three things about working in the corporate world:

1. Large companies move slowly. Good ideas often didn’t get implemented because they needed to be approved by too many people.
2. Climbing the corporate ladder is an obstacle to doing great work. Politics and turf wars are an inescapable part of the daily experience of working for a large company. This was a hindrance to getting things done and making things better.
3. Working for a large company can lead to frustration and burnout. Instead of enjoying the daily experience of work, he felt like he was running a gauntlet. His health and relationships were affected. As a result, he wanted to leave the corporate world and work on his own terms as an entrepreneur.

Fortunately, after some help from Seth Godin, the Personal MBA grew from a side project to a global movement. Josh then left P&G to work on the Personal MBA full-time.

In The Personal MBA, one of Josh’s major arguments – one that he feels very strongly about – is that you should skip business school, save your money, educate yourself, and develop a network on your own.

If you’re wondering what issue he has against MBA programs, he notes three big problems with business schools:

1. They’re very expensive. The primary question isn’t whether attending business school is a positive experience: it’s whether or not the experience is worth the cost.
2. MBA programs teach outdated and even damaging concepts.
3. MBA programs don’t guarantee a high-paying job, let alone make you a skilled manager or leader. 

The body of the book elaborates on 248 concepts, beginning with the five parts of every business: Value Creation, Marketing, Sales, Value Delivery, and Finance. After these sections, he dives deeper into non-traditional concepts, including The Human Mind, Working with Yourself, Working with Others, Understanding Systems, Analyzing Systems, and Improving Systems.

I like the fact that there’s a list of key terms in the front of the book, along with the corresponding page number where that term is explained in detail. While going through the book and reading about a particular concept, Josh mentions other related concepts, and highlights them in bold. Having the key terms in alphabetical order as a reference tool makes it easy to lookup that concept in order to read about it in greater detail.

Although the book is well-written and covers a wide variety of business concepts, Josh admits that it’s not possible to explore every application of each concept in a single book. He acknowledges that the book is more of a high-level overview of a wide body of useful business literature.

As such, there are other great resources in the world of business literature. He even lists a large number of books you can refer to if you’d like to continue your studies.

After reading his book, I’m convinced that you don’t need an MBA to become a successful businessperson. I’m a big fan of Josh and his work, and have already read a few of the books on his list of best business books.

Josh is living proof that you don’t need an MBA to find career success. He used the concepts that he learned and that he teaches in the book to enable himself to leave his corporate job to work on the Personal MBA full-time.

1) They Didn’t Think I Could ___ , but I Did.

This headline works because we have a natural tendency to root for the underdog. We love hearing stories of people who’ve overcome great obstacles and ridicule to achieve success.

So when this headline refers to something you’ve thought about doing, but talked yourself out of, you’ll want to know if the successful person had the same doubts and fears you have.

Example:

They Didn’t Think I Could Inspire an Audience With My Speech, but I Did!

2) Who Else Wants ___ ?

This headline implies that a lot of other people know something that the reader doesn’t.

Example:

Who Else Wants to Never Have to Worry About Money Again?

3) How ___ Made Me ___

People love stories and are interested in other people. This headline introduces a first-person story, and works best with dramatic differences.

Example:

How a Simple Decision Made Me a Millionaire.

4) Are You ___ ?

This headline grabs attention by challenging, provoking, or arousing curiosity.

Example:

Are You Prepared to Convince The Stubborn Prospect?

5) How I ___ ?

Like the “How ___ Made Me ___ ” headline, this introduces first-person story. It’s success lies in the strength of the benefit at the end.

Example:

How I Raised Myself from Failure to Success in Selling.

6) How to ___

This is a straightforward headline that works with any desirable benefit.

Example:

How to Lose Weight Easily and Safely

7) Secrets Of ___

People love to hear secrets.

Example:

Secrets Of An Olympic Gold Medal Swimmer

8) Millions (Thousands, Hundreds) Now ___ Even Though They ___

A plural version of the “They Didn’t Think I Could ___ , but I Did” headline.

Example:

Millions Now Feel Rejuvenated Even Though They Were Skeptical.

9) Warning: ___

Warning is an attention-getting word that works for a sales letter with a problem-solution theme.

Example:

Warning: You Could Be Paying Thousand of Dollars in Mutual Fund Fees – Unnecessarily.

10) Give Me ___ and I’ll ___

This headline announces your offer with a promise. If your offer is clear and good, this may be your best strategy.

Example:

Give Me 10 Days and I’ll Double Your Reading Speed.

11) ___ Ways to ___

Similar to the “How to” headline, but enhanced with an intriguing specific number.

Example:

10 Easy Ways to Cut Your Food Expenses.

The purpose of your business should always be this: to make someone’s life better. The best businesses in the world create the most value for others. The more value you create, the better your business will be, and the more prosperous you’ll become.

Five Parts of Every Business

A business is a repeatable process that consists of:

1. Creating and delivering something of value…
2. That other people want or need…
3. At a price they’re willing to pay…
4. In a way that satisfies the customer’s needs and expectations…
5. So that the business brings in enough profit to make it worthwhile for the owners to continue operation.

Economically Valuable Skills

Not all skills are economically valuable. If you want to improve your value as a businessperson, focus on improving the skills related to the Five Parts of Every Business. In other words, any skill that helps you create value, market, sell, deliver value, or manage finances is Economically Valuable.

The Iron Law of the Market

Every business is limited by the size and quality of the market it attempts to serve. If there aren’t enough people who really want what you have to offer, your chances of building a viable business are slim.

To fix this problem, do market research. Focus on making things people want to buy.

Core Human Drives

If you want to build a successful business, it helps to understand what people want. All human beings have five Core Human Drives that influence our decisions and actions:

1. The Drive to Acquire. The desire to obtain physical objects, as well as immaterial qualities like status, power, and influence. Businesses that connect to this drive include retailers and investment brokerages.
2. The Drive to Bond. The desire to feel valued and loved by forming relationships with others, either platonic or romantic. Businesses that connect to this drive include restaurants, conferences, and dating services.
3. The Drive to Learn. The desire to satisfy our curiosity. Businesses that connect to this drive include academic programs and book publishers.
4. The Drive to Defend. The desire to protect ourselves, our loved ones, and our property. Businesses that connect to this drive include insurance products and alarm systems.
5. The Drive to Feel. The desire for pleasure, excitement, entertainment, and anticipation. Businesses that connect to this drive include restaurants, movies, concerts, and sporting events.

All successful businesses sell some combination of money, status, power, love, knowledge, protection, pleasure, and excitement. The more clearly you communicate how your product satisfies one or more of these desires, the more attractive your offer will be.

Ten Ways to Evaluate a Market

Here’s a method of identifying the attractiveness of any potential market. Rate each of the ten factors below on a scale of 0 to 10, where 0 is extremely unattractive and 10 is extremely attractive. When in doubt, be conservative:

1. Urgency – How badly to people want or need this right now?
2. Market Size – How many people are actively buying things like this?
3. Pricing Potential – What’s the highest price a typical customer would be willing to pay for a solution?
4. Cost of Customer Acquisition – How easy is it to acquire a new customer? How much does it cost to generate a sale, in both money and effort?
5. Cost of Value Delivery – How much does it cost to create and deliver the value offered, both in money and effort?
6. Uniqueness of Offer – How unique is your offer? How easy is it for potential competitors to copy you?
7. Speed to Market – How fast can you create something to sell?
8. Up-Front Investment – How much will you need to invest before you’re ready to sell?
9. Upsell Potential – Are there secondary, related offers that you could present to customers?
10. Evergreen Potential – Once the initial offer is created, how much more work will you need to put into it in order to continue selling?

Add up your score. If it’s 50 or below, move on – there are better places to invest your resources. Anything between 51and 75 may help pay the bills, but won’t be a home run without a huge investment of resources, so plan accordingly. If the score is over 75, you’ve got a promising idea.

The Hidden Benefits of Competition

When two markets are equally attractive in other respects, you’re better off choosing the one with competition. Why? Because it means that there’s a market of paying customers for the idea, eliminating your biggest risk.

If other businesses are successfully serving a market, you don’t have to worry about investing in a dead end, since you already know that people are buying.

The best way to observe your potential customers is by becoming a customer. Buy what they’re offering. From the inside, you’ll learn what value the competitor provides, how they attract attention, what they charge, how they close sales, how they make customers happy, how they deal with issues, and what needs they aren’t yet serving.

Learn all you can from your competition. Then make something even more valuable.

The Mercenary Rule

Don’t start a business for the money alone. Why? It always takes more effort than you first expect. If money is the only thing that interests you, you’ll probably quit well before you find the pot of gold.

What do you find yourself coming back to over and over again? Building or finishing anything is mostly a matter of starting over and over again. Don’t ignore what pulls you.

Find an attractive market that interests you enough to keep improving your offer everyday. It’s mainly a matter of patience and active exploration.

But don’t ignore “boring” businesses until you investigate them. If you can find some part of the work that interests you, mundane markets can be attractive. “Dirty” businesses like plumbing and garbage collection aren’t sexy, but can be lucrative because there’s an ongoing need combined with relatively few people who are willing to meet the demand.

The Crusader Rule

Sometimes you’ll find an idea so fascinating that it becomes hard to think about it objectively. But there’s often a huge difference between an interesting idea and a solid business.

Some ideas don’t have a big enough market to support a business. So before launching a business, go through the Ten Ways to Evaluate a Market. Test your idea as quickly and inexpensively as you can before you fully commit.

Twelve Standard Forms of Value

To provide value to another person, it must take on a form they’re willing to pay for. Economic value usually takes on one of twelve forms:

1. Product. Create something, then sell it for more than it cost to make.
2. Service. Provide help, then charge for the benefits rendered.
3. Shared Resource. Create an asset that can be used by many people, then charge for access.
4. Subscription. Offer an ongoing benefit, and charge a recurring fee.
5. Resale. Purchase an asset from a wholesaler, then sell it to a retail buyer at a higher price.
6. Lease. Purchase an asset, then let another person use it for a predefined 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 to another business looking to reach that audience in the form of advertising.
9. Loan. Lend a certain amount of money, then collect payments over a predefined period of time equal to the original loan plus a predefined interest rate.
10. Option. Offer the ability to take a predefined action for a fixed period of time in exchange for a fee.
11. Insurance. Take on the risk of some bad thing happening to the policyholder in exchange for a predefined series of payments, then pay out claims only when that bad thing 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.

Form of Value #1: Product

A product is a tangible form of value. To run a Product-oriented business, you must:

1. Create a tangible item that people want.
2. Produce that item as inexpensively as possible, while maintaining an acceptable level of quality.
3. Sell as many units as possible for as high a price as the market will bear.
4. Keep enough inventory available to fulfill orders as they come.

Products can be durable, like cars and computers. They can also be consumable, like apples and vitamins.

Products don’t even have to be physical. Even though e-books and MP3s don’t have physical form, they are items that can be sold.

Providing value through a Product is valuable because Products can be duplicated. As such, they tend to scale better than other forms of value.

Form of Value #2: Service

A service involves helping someone in exchange for a fee. To create a successful Service, your business must:

1. Have employees capable of a skill that other people require but can’t, won’t, or don’t use themselves.
2. Ensure that the Service is provided with consistently high quality.
3. Attract and retain paying customers.

Doctors, massage therapists, and lawn care providers are all Service providers.

Services can be lucrative if the skills required to provide them are difficult to develop. The trade-off, however, is that they’re difficult to duplicate. Services depend on the investment of the provider’s time and energy, which are both finite.

If you’re providing a Service, charge enough to compensate for the time you’ll be investing on a daily basis in providing the Service.

Form of Value #3: Shared Resource

A Shared Resource is a durable asset that can be used by many people. You create the asset once, then charge your customers for its use.

To create a successful Shared Resource, you must:

1. Create an asset that people want access to.
2. Serve as many people as you can without affecting the quality of each person’s experience.
3. Charge enough to maintain and improve the Shared Resource over time.

Gyms are a great example of a Shared Resource. A gym purchases a variety of equipment, and its members benefit by having access to this equipment without purchasing it themselves. Instead, they pay an access fee, which is easier for a person to afford.

The challenge with a Shared Resource comes in monitoring usage levels. If you don’t have enough customers, you won’t be able to spread out the cost of the asset enough to cover upfront costs and ongoing maintenance.

But if you have too many customers, overcrowding will diminish each customer’s experience. Then they’ll get frustrated, stop using your resource, and tell others not to use it either. You’ve got to find the sweet spot between too few customers and too many to make the Shared Resource work.

Form of Value #4: Subscription

A Subscription provides ongoing benefits in exchange for a recurring fee.

To create a successful Subscription, you must:

1. Provide value to each subscriber on a regular basis.
2. Build a subscriber base, and continually attract new subscribers to make up for attrition.
3. Bill customers on a recurring basis.
4. Keep each subscriber as long as possible.

Cable TV is a great example of a Subscription. The company will continue providing television service as long as you make the payments.

Subscription is an attractive form of value because it provides more predictable revenue. You don’t need to resell your customers everyday.

The key to Subscription offers is doing everything you can to keep customer attrition low. Any attrition you do experience must be overcome by enrolling more customers.

Form of Value #5: Resale

Resale is the purchase of an asset from a wholesale seller, followed by the sale of that asset to a retail buyer at a higher price.

To provide value as a reseller, you must:

1. Purchase a product as inexpensively as you can, usually in bulk.
2. Keep the product in good condition until the sale.
3. Find purchasers as quickly as possible to keep inventory costly low.
4. Sell the product for as much as you can, preferably a multiple of the purchase price.

Resellers are valuable because they help wholesalers sell products without having to find individual purchasers.

To a farmer, selling apples to millions of individuals would be time-intensive and inefficient. It’s better to sell them all to a grocery chain and focus on growing more apples. The grocery then resells them to individual consumers at a higher price.

Finding good products at low prices and managing inventory are the keys to reselling. Without a steady supply of products at a low enough price to turn a profit, a reseller will have a hard time continuing it operations. To ensure that you get a reliable supply of products at low prices, build close relationships with your suppliers.

Form of Value #6: Lease

A lease involves buying an asset, followed by letting another person use that asset for a predefined amount of time in exchange for a fee. As long as the asset is durable enough to survive rental to another person and return ready for reuse, you can Lease it.

To provide value with a Lease, you must:

1. Acquire an asset other people want to use.
2. Lease the asset to a paying customer on favorable terms.
3. Protect yourself from adverse events, such as the loss or damage of the leased asset.

A customer benefits from Leasing by being able to use an asset for less than the outright purchase price. You may not be able to afford a luxury car that costs tens of thousands of dollars. But for a few hundred dollars a month, you may be able to lease one.

Leasing also makes it possible to live in an expensive building for much less than it would cost to buy or build it yourself. After your lease is up, the owner can lease the asset to someone else.

Most assets have a limited useful life, so you must charge enough to bring in more revenue than the purchase price before the asset loses its value. Also, plan for repair and replacement costs so that you charge enough money to cover you if your asset is lost or damaged in use.

Form of Value #7: Agency

Agency involves selling an asset you don’t own. Instead of producing value by yourself, you team up with someone who has value to offer, then work to find a purchaser. In exchange for establishing a relationship between your source and a buyer, you earn a commission.

To provide value via Agency, you must:

1. Find a seller who has a valuable asset.
2. Establish contact and trust with potential buyers of that asset.
3. Negotiate until an agreement is reached on the terms of sale.
4.  Collect the agreed-upon commission from the seller.

Sellers benefit from an Agency relationship because it generates sales that might not otherwise happen. Literary agents are a classic example. By working with an agent who has connections in the publishing industry, a potential author is far more likely to land a publishing contract. In exchange for finding a publisher and negotiating the deal, the agent gets a percentage of the book’s advance and royalties.

Buyers also benefit from an Agency relationship. Agents act as a filter for buyers, who trust that the agent will bring their attention to assets worth purchasing and protect them from bad deals. Residential real estate is a great example. By working with an experienced buyer’s agent who knows the area well, purchasing a home in a new town is much easier.

The key to Agency is to ensure that your commission is high enough to make the effort worthwhile. Since most Agency relationships are dependent upon closing the sale, focus on activities that will result in a completed transaction.

Form of Value #8: Audience Aggregation

Audience Aggregation involves getting the attention of a group of people with similar characteristics, then selling access to that audience to a third party. Since attention is limited and valuable, gathering a group of people in a certain demographic is valuable to businesses that are interested in getting the attention of those people.

To provide value via Audience Aggregation, you must:

1. Identify a group of people with common characteristics or interests.
2. Create a way of consistently attracting that group’s attention.
3. Find third parties who are interested in buying the attention of that audience.
4. Sell access to that audience without alienating the audience itself.

Audience Aggregation benefits the audience by providing something worthy of their attention. Ad-supported websites are great examples. Readers benefit from the content these sources provide in exchange for being exposed to some level of advertising. Most people are willing to be exposed to a certain amount of advertising if the content is good.

Audience Aggregation benefits the advertiser because it gets attention, which leads to sales. Advertising attracts attention, attention brings prospects, and prospects lead to sales. As long as the sales exceed the cost of the advertising plus the business’s overhead, advertising is a valuable tool to bring in new customers. Then the advertiser can continue to support the aggregator by buying more advertising.

Form of Value #9: Loan

A loan is an agreement to let the borrower use a certain amount of resource for a certain period of time. In exchange, the borrower must pay the lender a series of payments over a predefined period of time, which is equal to the original loan plus a predefined interest rate.

To provide value via Loans, you must:

1. Have an amount of money to lend.
2. Find people who want to borrow that money.
3. Set an interest rate that compensates you adequately for the Loan.
4. Estimate and protect against the possibility that the Loan won’t be repaid.

Used responsibly, Loans allow people to benefit from immediate access products and services that would otherwise be too expensive to buy outright. Mortgages allow people to live in houses without having hundreds of thousands of dollars in the bank. Auto loans allow people to drive new vehicles in exchange for a monthly payment, rather than a 100 percent down payment.

Loans benefit the lender, who has excess capital. The addition of compound interest on top of the original loan means that the lender will collect much more than the original loan amount.

The process of identifying how risky a Loan is – a process called underwriting – is critically important for lenders, who often require some sort of collateral to protect against the risks of a Loan going sour. If the Loan isn’t repaid, ownership of the collateral is transferred to the lender, who then sells the collateral to recoup any lost funds.

Form of Value #10: Option

An Option is the ability to  take a predefined action for a fixed period of time in exchange for a fee. Options include financial securities, movie and concert tickets, and coupons. In exchange for a fee, the purchaser has the right to take some specific action – buy a financial security at a particular price, attend a show, or purchase an asset – before the deadline.

To provide value via Options, you must:

1. Identify an action people may want to take in the future.
2. Offer potential buyers the right to take that action before a specified deadline.
3. Convince potential buyers that the Option is worth the asking price.
4. Enforce the deadline for taking action.

Options are valuable because they give the purchaser the ability to take a specific action without requiring them to do so. If you buy a movie ticket, you have the right to occupy a seat in the theater, but you don’t have to if a better opportunity presents itself. All you’re buying is the right to exercise the Option to see the movie at the specified time.

Options are a form of value because they offer flexibility. If you can give people more flexibility, you may have discovered a viable business model.

Form of Value #11: Insurance

Insurance involves transferring risk from the purchaser to the seller. In exchange for taking on the risk of some specific bad thing happening to the policyholder, the policyholder gives the insurer a predefined series of payments. If the bad thing actually happens, the insurer is responsible for paying the bill. If it doesn’t, the insurer keeps the money.

To provide value via Insurance, you must:

1. Create a binding legal agreement that transfers the risk of a specific bad thing happening from the policyholder to you.
2. Estimate the risk of that bad thing actually happening using available data.
3. Collect the agreed-upon series of payments over time.
4. Pay out legitimate claims upon the policy.

Insurance provides value to the purchaser by protecting them from downside risk. Homeowners’ insurance is a great example. If a house catches fire and burns to the ground, most homeowners don’t have enough cash to purchase another. But if they’re insured, the insurance will compensate the homeowner and allow them to buy a new home. If the home isn’t destroyed, the insurer keeps the premium payments.

Insurance works because it spreads risk over many individuals. If an insurer writes policies for millions of homes, it’s unlikely that all of them will burn to the ground at once. Only a certain number of claims will have to be paid. As long as the insurer brings in more premium payments than it pays in claims, the insurer makes money. Auto insurance, health insurance, and warranty coverage work the same way.

Insurers must avoid “bad risks,” maximize premiums, and minimize payments on claims. As such, they must be careful to avoid fraudulent activity, both by preventing fraudulent claims and by not defrauding purchasers by collecting payments without paying legitimate claims.

Form of Value #12: Capital

Capital is the purchase of an ownership stake in a business. For people who have resources to allocate, providing Capital helps business owners expand or enter new markets. Angel investing, venture capital, and buying stock in publicly traded companies are all examples of providing value via Capital.

To provide value via Capital, you must:

1. Have resources available to invest.
2. Find a promising business that you’d be willing to invest in.
3. Estimate how much that business is currently worth, how much it may be worth in the future, as well as the probability that the business will fail, which would result in the loss of your Capital.
4. Negotiate the amount of ownership you’d receive in exchange for the amount of Capital you’re investing.

Investors benefit from providing Capital by acquiring a percentage of the company’s ownership, which allows them to benefit from the business’s activities without active involvement. If the business brings in a lot of cash, investors may benefit from a regular dividend. If it’s listed on a public stock exchange, investors may sell their shares of the company for a profit.

Perceived Value

All forms of value are not created equal. Perceived Value determines how much your customers will be willing to pay for what you’re offering. The higher the perceived value of your offering, the more you’ll be able to charge for it.

The less attractive the end result and the more end-user involvement it takes to get the benefit, the lower the value your customers will place on your offer.

For instance a pool owner may only be willing to pay a one-time fee of $50 for a pool cleaning kit, but they’d be willing to pay $250 a month to have someone clean their pool for them every week. The pool gets cleaned either way, but the weekly cleaning service has a higher perceived value because the pool owner doesn’t need to spend any effort to get the same desired result.

Focus on creating Forms of Value that require the least end-user effort to get the best possible end result – they have the highest perceived value.

Modularity

The Twelve Standard Forms of Value aren’t mutually exclusive: you can offer any combination of these forms to your customers to see which ones they like best.

Most successful businesses offer value in multiple forms. Movie theaters combine movie showings (a Shared Resource) with tickets (an Option) and concession sales (Products).

In most companies, each of these offers is handled separately, and the customer can choose which offers they want to take advantage of. By making offers Modular, the business can create and improve each offer in isolation, then combine offers as necessary to better serve their customers.

Bundling and Unbundling

The benefit of making your offers Modular is that it lets you take advantage of Bundling. Bundling allows you to repurpose value that you’ve already created to create even more value.

Bundling occurs when you combine multiple smaller offers into a single large offer. For instance, in the phone industry a mobile phone (a Product) is bundled with a monthly service plan (a Subscription) for a single price.

Typically, the more offers contained in the bundle, the higher the Perceived Value of the offer, and the more the business can charge.

Unbundling is the opposite of Bundling: it’s taking one offer and splitting it up into multiple offers. A good example is selling MP3 downloads of a single song instead of the entire album. Customers may not want to pay $10 for the whole album, but they may be willing to pay a dollar for the song they like.

Bundling and Unbundling helps you create value for different types of customers without creating something new. By combining offers in various forms, you can offer your customers exactly what they want.

Prototype

Ideas are worthless – discovering whether or not you can make them work in reality is the important job of an entrepreneur.

Don’t be shy about showing potential customers your work in progress. It’s usually better to get feedback from real customers as soon as you can.

A Prototype is an early representation of what your offer will look like. It could be a physical model, a diagram, or a single page that describes your features and benefits. It doesn’t have to be fancy: all it needs to do is represent what you’re offering in a tangible way, so that potential customers can understand what you’re doing well enough to give you feedback.

For best results, create your prototype in the same form as the finished product. If you’re creating a physical product, make a tangible model. If you’re creating a service, create a diagram of everything that happens in the process. The more realistic your Prototype is, the easier it’ll be for people to understand what you’re trying to do.

The purpose of a Prototype isn’t to make it perfect: it’s to quickly create something your potential customers can evaluate. Then you’ll get feedback that will help make your offer even better.

The Iteration Cycle

Nobody – no matter how talented they are – gets it right the first time.

The Iteration Cycle helps you make anything better over time. It has six steps, which together are called the WIGWAM method:

1. Watch – What’s working and what’s not?
2. Ideate – What could you improve? What are your options?
3. Guess – Which of your ideas do you think will make the biggest impact?
4. Which – Decide which change to make.
5. Act – Make the change.
6. Measure – Was the change positive or negative? Should you keep it, or go back to how things were before?

Iteration Velocity

When creating a new offer, work through the Iteration Cycle as quickly as you can. The faster you move through the process, the better your offer will become.

Keep each iteration small, clear, and quick, basing each iteration on what you learned from previous iterations. After you’ve gone through a few cycles, you’ll have a better understanding of the market, knowledge of what people want enough to pay for, and an understanding of whether or not you have a viable offer to give them.

If you find that you have what people want, you can move forward. If there’s no demand, you can quickly move on to your next idea.

Feedback

Getting useful Feedback from potential customers is the core of the Iteration Cycle. Feedback from real prospects helps you understand how well your offer meets their needs before development is complete, letting you make changes before you start selling.

Here are tips to maximize the value of the Feedback you get:

1. Get feedback from potential customers instead of friends and family.
2. Ask open-ended questions. Short who/what/when/where/why/how questions work well.
3. Keep calm. Getting genuine Feedback requires thick skin. Don’t get offended if someone doesn’t like what you’ve created; they may be doing you a great service.
4. Take what you hear with a grain of salt. Even the most discouraging Feedback contains useful information that can help make your offer better. The worst response isn’t emphatic dislike: it’s total apathy.
5. Give potential customers the chance to preorder. The best piece of Feedback you can get during the iteration process is the other person’s willingness to actually buy what you’re creating.

If no one wants to preorder, ask why they’re not willing to buy right now. You’ll understand their major barriers to purchase.

Alternatives

As you create your offering, you can’t avoid making choices between competing Alternatives. Should you optimize for market A, market B, or try to please both? If you invest more in your offering, will your customers be willing to pay more to defray the expense?

Examining possible Alternatives and considering the customer’s perspective results in better choices. When making decisions about what to include and what to leave out, it’s important to appreciate the Alternatives that your potential customers face when they decide whether or not to buy your offering. Once you’re aware of the options, you can examine the combinations of those Alternatives to present an attractive offer.

Trade-offs

A trade-off is a decision that places more value on one of several competing options. You can’t have everything you want all the time. You must do the best you can by choosing the option with the characteristics that matter most to you at the moment you make the decision.

Everyday, you and the people around you make Trade-offs. Predicting how people will make Trade-offs is tricky – values change quickly, given the environment and context.

When making decisions about what to include in your offering, look for Patterns – how groups of people value some characteristic in a certain context. Deciding what to include and what to leave out will never make everyone happy, so perfection shouldn’t be your goal. Pay attention to the Patterns behind what your best customers value, and can focus on improving your offering for most of your best potential customers most of the time.

Economic Values

As you create your offering, find out what your potential customers value more than the buying power of their money. There are nine common Economic Values that people usually consider when evaluating a potential purchase. They are:

1. Efficacy – How well does it work?
2. Speed – How fast does it work?
3. Reliability – Can I depend on it?
4. Ease of Use – How much effort does it require?
5. Flexibility – How many things does it do?
6. Status – How does this affect they way others see me?
7. Aesthetic Appeal – How attractive is it?
8. Emotion – How does it make me feel?
9. Cost – How much do I need to give up to get this?

These values can also be categorized in terms of two characteristics: convenience and fidelity. Things that are quick, reliable, easy, and flexible are convenient. Things that offer quality, status, aesthetic appeal, or emotional impact are high-fidelity.

Almost every improvement you make to an offer can be thought of in terms of improving convenience or fidelity. It’s difficult to optimize for both at the same time, so most successful offerings try to provide the most convenience or fidelity among all competing offerings.

Relative Importance Testing

People want everything. Your customers want products that provide exceptional results instantly, ever time, with no effort. At the same time, they want it to make them rich, famous, and attractive. They also want it to be free. Ask them what they’d be willing to give up, and they’ll answer that everything is critically important.

The reality, however, is always different. People buy products that aren’t free or perfect, and they’ll be happy with their decision. Why?

Because people won’t accept trade-offs unless they’re forced to make a decision. Since there’s no such thing as the perfect offering, people are happy to settle for the next best alternative.

The best way to discover what people value is to ask them to make trade-offs during the research process. Relative Importance Testing helps you find out what people want by asking them questions designed to simulate real-life trade-offs.

To do this, list random question sets containing four to five criteria, along with questions regarding which item is most important, as well as which item is least important.

By asking the participant to make a choice, you’re collecting accurate information about how the participant would respond when faced with a similar choice in the real world. When the results are aggregated, the relative importance of each benefit becomes clear. Then you’ll know which benefits you should focus on to make your offer maximally attractive.

For more tips on how to master the art of business, check out The Personal MBA by Josh Kaufman.