We drew these sketches ourselves. Hormozi's own drawings in his books look far better.
The four components
Dream outcome
The result your customer actually wants, in their words, not in your features. The clearer and bigger the goal, the higher the numerator.
Perceived likelihood of achievement
How sure the customer is that it will work for them. Proof, case examples, a visible method, and a fair guarantee raise this value.
Time delay
How long it takes to reach the result, felt and real. An early, visible first step beats a big promise far in the future.
Effort and sacrifice
What the customer has to do and give up for it. The less effort, change, and sacrifice it takes, the higher the perceived value.
A worked example
A made-up example, only for illustration, not a promise for your business. Picture two offers for the same thing, an online course on a topic. Offer A is simply called Course with 40 videos. The dream outcome stays vague, success feels uncertain, the result comes at some point, and you do the work alone. All four parts drag the value down. Offer B is called Your first result in 30 days, with templates, weekly feedback, and a clear plan. Same topic, but the goal is named, the likelihood feels higher, the time delay is shorter, and the effort is lower. The product barely changed. The perceived value changed almost entirely. That is the point: you do not move the price, you move the four parts.
How to move each component
Take your offer and walk through the four parts one by one. For the dream outcome, describe the goal in your customers' words. For likelihood, show proof, make the method visible, and take out risk. For time delay, build in an early, visible milestone. For effort, cut everything the customer does not have to do themselves. You do not have to work on all four at once. The weakest part drags the whole fraction down, so start there. How this becomes a finished offer, and how the Value Equation sits inside a Grand Slam Offer, follows next.
The example above is made up and only illustrates the model. It is not a promise of results.
FAQ
What is the Value Equation?
A model by Alex Hormozi that breaks the perceived value of an offer into four parts: dream outcome and perceived likelihood in the numerator, time delay plus effort and sacrifice in the denominator.
Value Equation, value formula, or Wertgleichung?
They mean the same thing. The original term is the Value Equation. In German it circulates as Wertgleichung, Werteformel, and Wert-Gleichung.
Keep watching