An option is the ability to take a predetermined action for a limited time in exchange for a fee. Financial securities come to mind when most people think about options, but other options are all around us: movie tickets, concert tickets, amusement park tickets, coupons, and retainers are all examples of options. In exchange for a fee, the buyer has the right to take a specific action – attend a show, buy a product, or purchase a financial security at a specific price – before the indicated deadline.
To create a successful business that provides value through the use of options, you need to:
- Find an action people might want to take in the future.
- Offer potential buyers the right to take that action before a specified deadline.
- Convince potential buyers that the option is worth your asking price.
- Enforce the deadline on taking action.
Options are valuable to buyers because they give them the ability to take a certain action without requiring them to take that action. For instance, if you buy an amusement park ticket, you have the ability to occupy a seat on every ride at the park, but you don’t have to do so – if you find a better opportunity. When you buy the ticket, all you’re buying is the option to experience every ride at the park – nothing more.
Options are often overlooked as a form of value – flexibility is one of the Three Universal Currencies. If you can give people more flexibility, you may have discovered a profitable business model.
To learn more about options as a form of value, check out The Personal MBA by Josh Kaufman.
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