robhastings

Creating Value BEFORE Valuation

Posted by Rob on October 10th, 2012 at 8:50am

As my team and I prepared for the launch of onLessons.com with a competitive market analysis, one theme was definitively present: companies in our space are attempting to create valuation BEFORE creating value for their customers.

So you ask in the simplest of terms… isn't the point of a business to make money? Why wouldn't they want to create a higher company value based on increased revenues and profits? Yes, indeed it is. However, in my opinion, a company that attempts to create valuation BEFORE creating value is unsustainable in the long term.

For example, two of onLessons.com's indirect competitors are in the tutoring and music lessons verticals. The tutoring company takes a 40% commission from each tutoring session, and the music lessons company takes a 50% commission from each music lesson. If that's not enough, they then charge instructors a yearly "administrative" fee.

Lesson instructors and tutors typically teach in order to earn secondary income. 50% commission from each lesson is absurd, and as we found in completing our own customer development, most instructors are outraged by the greed of these companies. As a result, these companies' attempt to create valuation before creating value is not sustainable as it creates unhappy customers who feel they have been cheated.

So how do you create value BEFORE valuation?

You talk to prospective customers to determine their needs; you build a darn good product or service with features that customers want; you offer that product or service after determining the customer’s willingness to pay; and finally, you offer the product or service at the outset in a way that has zero risk to the customer.

It's that simple. As a result, customers are excited to try your product or service, and they will use it prolifically for the long-term knowing that their interests as customers are being placed before a company's desire to create financial wealth.

onLessons.com is committed to this principle. In the end, our company will create revenue through a mass of satisfied customers who understand that our priority is creating value first.

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