WEBVTT 00:00:08.240 --> 00:00:11.919 Welcome to the Business Abundance Podcast, providing 00:00:11.919 --> 00:00:14.359 the tools and knowledge to help small business 00:00:14.359 --> 00:00:17.699 owners succeed. For additional resources, visit 00:00:17.699 --> 00:00:23.519 www .businessabundance .online. Hello, welcome 00:00:23.519 --> 00:00:26.320 back to the Business Abundance Podcast. Today, 00:00:26.339 --> 00:00:30.719 we're diving into one of the most misunderstood 00:00:30.719 --> 00:00:34.060 but probably powerful aspects of running a profitable 00:00:34.060 --> 00:00:37.619 business. and sustainable business, and it is 00:00:37.619 --> 00:00:42.439 pricing. So whether you're a consultant, a product 00:00:42.439 --> 00:00:45.520 based business or somewhere in between, we will 00:00:45.520 --> 00:00:49.100 be talking through pricing strategies that hopefully 00:00:49.100 --> 00:00:51.640 maximize your profit and keep your customers 00:00:51.640 --> 00:00:54.659 loyal. What do you reckon, team? That's amazing. 00:00:54.799 --> 00:00:57.820 Sounds good. Yeah. Awesome. So let's chat about 00:00:57.820 --> 00:01:00.100 the different pricing models. Ian, do you want 00:01:00.100 --> 00:01:03.090 to listen for us? I have no idea. I'm going to 00:01:03.090 --> 00:01:05.049 learn as much as everyone else on this one. It's 00:01:05.049 --> 00:01:06.950 going to be great. I can start with one. Yeah, 00:01:06.950 --> 00:01:08.750 go for it. We can charge for our hours. We can 00:01:08.750 --> 00:01:11.629 charge for our materials. Yep. And add a little 00:01:11.629 --> 00:01:15.370 bit onto that. Ah, yeah. So I mark up. Yes. Mark 00:01:15.370 --> 00:01:17.189 up on materials. I charge a rate for our hours. 00:01:17.310 --> 00:01:19.689 What do they call that one? Hourly rate. Hourly 00:01:19.689 --> 00:01:23.150 rate, yeah. So they might have done a fancy term. 00:01:23.409 --> 00:01:26.260 It probably is. There's value based. Pricing, 00:01:26.340 --> 00:01:28.219 which we'll probably do a bit of a deep dive 00:01:28.219 --> 00:01:32.640 into, which is pricing based on the perceived 00:01:32.640 --> 00:01:35.980 value of your services or products to the customer. 00:01:36.579 --> 00:01:39.219 You've got tiered pricing. So that's like the 00:01:39.219 --> 00:01:43.439 basic standard premium subscriptions, which means 00:01:43.439 --> 00:01:45.760 that you can cater to different budget levels, 00:01:45.980 --> 00:01:48.180 I guess. Like Netflix? Yeah. You think Netflix 00:01:48.180 --> 00:01:51.980 can pay less? Yeah. So I mean, Apple, that does 00:01:51.980 --> 00:01:53.879 value -based pricing because you're not... paying 00:01:53.879 --> 00:01:56.359 for the materials as such, you're paying for 00:01:56.359 --> 00:02:00.200 the, how fancy it looks. Status quo. Yeah. And 00:02:00.200 --> 00:02:02.900 then you've got Spotify, for example, that uses 00:02:02.900 --> 00:02:06.379 the tiered pricing based on your subscription, 00:02:06.519 --> 00:02:08.840 whether it's family or whether it's individual 00:02:08.840 --> 00:02:11.439 or whether it's student. I can't quite remember. 00:02:11.620 --> 00:02:13.939 There's so many. I jumped on the family one. 00:02:14.300 --> 00:02:17.400 So I think we've got a family one. So I like 00:02:17.400 --> 00:02:20.759 the idea of a value -based pricing model. So 00:02:20.939 --> 00:02:25.039 Let's just start off with what the ethical issues 00:02:25.039 --> 00:02:28.020 are when it comes to time -based pricing, because 00:02:28.020 --> 00:02:33.199 a lot of people do time -based pricing and sometimes 00:02:33.199 --> 00:02:35.060 they're shooting themselves in the foot. So Rowan, 00:02:35.060 --> 00:02:36.919 do you want to talk about that? Yeah, we can 00:02:36.919 --> 00:02:40.060 do that. I guess we've also got horses for courses 00:02:40.060 --> 00:02:42.719 scenario. we can, you know, time -based billing 00:02:42.719 --> 00:02:45.340 sometimes is probably the best thing to do. But 00:02:45.340 --> 00:02:48.020 maybe if we're going to go to value pricing, 00:02:48.120 --> 00:02:50.539 I was going to add one first, but like market 00:02:50.539 --> 00:02:53.120 -based pricing. So like what will the market 00:02:53.120 --> 00:02:55.520 pay? Which is a different number. Again, we can't, 00:02:55.520 --> 00:02:57.500 it's a bit harder to calculate, but it's only 00:02:57.500 --> 00:02:59.360 worth what people will pay for it. Yeah. Yep. 00:02:59.620 --> 00:03:01.180 Yeah. Sometimes people are like, Oh, I can't 00:03:01.180 --> 00:03:03.919 charge for that. It's like, can you? Can't you? 00:03:04.060 --> 00:03:06.460 I worked it out and no one's going to pay for 00:03:06.460 --> 00:03:08.560 it. It's like, well, okay. Well, what will the 00:03:08.560 --> 00:03:10.379 market pay? They'll pay this. Are you happy to 00:03:10.379 --> 00:03:13.719 do it? No, okay, better not sell it. But yeah, 00:03:13.759 --> 00:03:15.979 so I had that once that list to talk about, but 00:03:15.979 --> 00:03:18.159 value -based pricing, I think the concept is 00:03:18.159 --> 00:03:22.300 that you charge based on the result to the client. 00:03:23.300 --> 00:03:26.419 So for example, if you're an hourly biller and 00:03:26.419 --> 00:03:29.020 you're doing one hour's worth of work, you charge 00:03:29.020 --> 00:03:31.879 $100 per hour. Instead of giving someone a bill 00:03:31.879 --> 00:03:35.090 of $100, you might give them a bill of 500. But 00:03:35.090 --> 00:03:37.150 the only way that that would be economically 00:03:37.150 --> 00:03:40.689 viable, and by economically viable I mean people 00:03:40.689 --> 00:03:42.810 will pay you for it, is if the result to them 00:03:42.810 --> 00:03:46.710 is far greater than the 500. So for some people 00:03:46.710 --> 00:03:49.250 that have more skills and experience or can do 00:03:49.250 --> 00:03:51.449 work a lot faster than other people, so if you're 00:03:51.449 --> 00:03:53.870 a landscaper for example and you work, you know, 00:03:54.129 --> 00:03:56.469 you've been doing it for 15 years and your body's 00:03:56.469 --> 00:03:57.930 not broken, you're still pretty good, you've 00:03:57.930 --> 00:04:00.389 got all the tools and a bit of know how, you'll 00:04:00.389 --> 00:04:02.389 probably be faster than the next guy, but if 00:04:02.389 --> 00:04:05.120 you told someone you're charged, $150 an hour, 00:04:05.599 --> 00:04:07.300 rather than they're 75, they're probably not 00:04:07.300 --> 00:04:09.780 going to hire you. But if you said to do your 00:04:09.780 --> 00:04:11.879 backyard, it's going to be two and a half grand, 00:04:12.560 --> 00:04:14.400 they'll probably compare it to the other guy 00:04:14.400 --> 00:04:17.040 and go, oh, that's about right. Yep. So that's 00:04:17.040 --> 00:04:19.000 probably the easiest way to explain value based 00:04:19.000 --> 00:04:22.459 pricing. Is that the old engineer story of the 00:04:22.459 --> 00:04:25.079 65 year old about to retire engineer comes in 00:04:25.079 --> 00:04:26.920 to fix something that no one else has been able 00:04:26.920 --> 00:04:28.620 to fix. And he comes in and he hits it once with 00:04:28.620 --> 00:04:31.120 a hammer and now it's fixed and he gives him 00:04:31.120 --> 00:04:34.600 a bill for $15 ,000. They say, well, you only 00:04:34.600 --> 00:04:36.139 hit it once with a hammer. He says, no, you're 00:04:36.139 --> 00:04:38.240 not paying for that. You're paying for me knowing 00:04:38.240 --> 00:04:42.399 where to hit it. Yeah. Um, and so I think, uh, 00:04:42.399 --> 00:04:44.800 people struggle to sort of articulate that to 00:04:44.800 --> 00:04:47.339 clients or, or when you're saying the ethical 00:04:47.339 --> 00:04:50.279 issues and things like that. Sleep at night if 00:04:50.279 --> 00:04:52.620 they send someone a big bill, but at the end 00:04:52.620 --> 00:04:54.500 of the day, sometimes people want something done 00:04:54.500 --> 00:04:57.519 better, faster, smarter, and they just care about 00:04:57.519 --> 00:04:59.259 the result. And if you're one of those people 00:04:59.259 --> 00:05:01.959 that can get that result quickly, faster and 00:05:01.959 --> 00:05:04.410 more confidently. It's pretty hard to say I'm 00:05:04.410 --> 00:05:05.889 worth $2 ,000 an hour and no one's going to pay 00:05:05.889 --> 00:05:07.870 you. Even if you're one of the best lawyers in 00:05:07.870 --> 00:05:09.610 let's say New York City, you're the best lawyer 00:05:09.610 --> 00:05:11.589 there, no one's going to pay you $15 ,000 per 00:05:11.589 --> 00:05:13.629 hour. Even if you're worth it, especially to 00:05:13.629 --> 00:05:16.529 those companies that are worth billions or you're 00:05:16.529 --> 00:05:18.009 more than playing with pretty large transactions. 00:05:18.670 --> 00:05:21.470 But they'll be happy to pay you $100 ,000 to 00:05:21.470 --> 00:05:24.490 do a project for them, no problems. So that's 00:05:24.490 --> 00:05:28.689 an interesting one. Why do you think the default 00:05:28.689 --> 00:05:31.149 is to do the hourly based pricing? It's easy 00:05:31.149 --> 00:05:33.540 to calculate. Yeah. I know when I first started 00:05:33.540 --> 00:05:36.939 out doing logo design and websites, you're projecting 00:05:36.939 --> 00:05:40.699 here. I am a little bit, but I've also worked 00:05:40.699 --> 00:05:42.839 with a lot of clients who feel like they can't 00:05:42.839 --> 00:05:45.660 charge more. It's, it's a self -esteem thing. 00:05:46.259 --> 00:05:50.339 You're valuing yourself at the 15 % markup that 00:05:50.339 --> 00:05:53.899 you put on the materials or whatever it is when 00:05:53.899 --> 00:05:56.839 you materials plus what you assume will be your 00:05:56.839 --> 00:05:59.439 alley. That's all you're valuing yourself to 00:05:59.439 --> 00:06:02.829 be. A hundred percent. Yeah. So I think it's 00:06:02.829 --> 00:06:05.589 can be that's probably relating to how much you're 00:06:05.589 --> 00:06:08.370 charging people becomes the issue of confidence. 00:06:08.870 --> 00:06:11.069 They're going back to why do people use ours 00:06:11.069 --> 00:06:15.209 and material or markup. It's just easy to calculate. 00:06:15.389 --> 00:06:17.290 Like if we're on a wage, we get paid per hour. 00:06:17.670 --> 00:06:19.029 You know, if we're paying a contractor, we pay 00:06:19.029 --> 00:06:21.350 them per hour. When you see people, it's per 00:06:21.350 --> 00:06:23.810 hour. And you know, like it's a lot of similarities. 00:06:24.149 --> 00:06:28.100 So it's also good if you You know, you need to 00:06:28.100 --> 00:06:30.000 earn a certain amount of money if you go to someone's 00:06:30.000 --> 00:06:31.800 house and you start working or you're doing a 00:06:31.800 --> 00:06:34.060 job for someone charging per hour. If you mark 00:06:34.060 --> 00:06:36.779 something up, you still get the bill and then, 00:06:36.839 --> 00:06:38.420 but then you've got the arguments over how long 00:06:38.420 --> 00:06:39.839 should have it taken, all this sort of stuff. 00:06:40.240 --> 00:06:42.240 So it's easy to justify the price as well. If 00:06:42.240 --> 00:06:44.139 you go, well, this took us six hours to do this. 00:06:44.220 --> 00:06:45.720 Like I look at my mechanic bill every time I 00:06:45.720 --> 00:06:47.800 take the Volkswagen in. Yeah. So that took four 00:06:47.800 --> 00:06:50.680 hours. Yeah. But how do you know that six hours 00:06:50.680 --> 00:06:53.079 was worthwhile? You don't. So that leads to a 00:06:53.079 --> 00:06:55.500 bit of the ethical thing that C jumps straight 00:06:55.500 --> 00:06:58.290 to. You can look at it a couple of ways. Fixed 00:06:58.290 --> 00:07:01.550 price servicing, I know Toyota do a lot of that 00:07:01.550 --> 00:07:03.670 with their vehicles. So they'll say, here's a 00:07:03.670 --> 00:07:05.350 new car and here's the fixed price servicing 00:07:05.350 --> 00:07:08.009 for the next however long. And most people prefer 00:07:08.009 --> 00:07:11.329 to, yeah, at least I know what I'm up for. I'm 00:07:11.329 --> 00:07:12.889 not sending to mechanic and who knows what I'm 00:07:12.889 --> 00:07:14.889 going to get. And that's a really good example 00:07:14.889 --> 00:07:17.250 of value -based, the single service is worth 00:07:17.250 --> 00:07:18.910 this. If we do it fast, they're great for us. 00:07:18.930 --> 00:07:21.170 If we do it slow, bad for us, but then for the 00:07:21.170 --> 00:07:24.129 client, it's the same cost either way. And that's 00:07:24.129 --> 00:07:26.310 got to be reasonable. compared to other options. 00:07:26.709 --> 00:07:28.449 But I guess the ethical side is that if you're 00:07:28.449 --> 00:07:31.350 an hourly billing, the best result for you is 00:07:31.350 --> 00:07:33.009 working more hours because you get paid more. 00:07:33.589 --> 00:07:35.870 The best result for the client is you taking 00:07:35.870 --> 00:07:37.509 a shorter amount of time because they have to 00:07:37.509 --> 00:07:41.149 pay less. So it's generally just there's no win 00:07:41.149 --> 00:07:43.709 -win there. Yeah, if you're fast and skilled, 00:07:43.709 --> 00:07:46.949 you make less. So you're kind of hurting yourself. 00:07:47.230 --> 00:07:48.750 Yeah, and the clients love it. But then suddenly 00:07:48.750 --> 00:07:51.949 you're overworked and underpaid. So it's not 00:07:51.949 --> 00:07:54.310 fair to you or your clients. Well, you've bought 00:07:54.310 --> 00:07:55.990 yourself a job in that situation, haven't you, 00:07:55.990 --> 00:07:58.649 really? Yeah. And then why do people do it is 00:07:58.649 --> 00:08:00.490 if you've got six people working in your business 00:08:00.490 --> 00:08:02.009 and you need to price something, pretty easy 00:08:02.009 --> 00:08:03.810 to calculate and pretty easy to standardise. 00:08:03.910 --> 00:08:05.829 But we've got some great examples we do with 00:08:05.829 --> 00:08:07.930 people on the consulting side where we show them 00:08:07.930 --> 00:08:10.290 you price that way, you can have four jobs priced 00:08:10.290 --> 00:08:14.050 exactly the same way and wildly different examples 00:08:14.050 --> 00:08:15.709 over the course of the year of how much money 00:08:15.709 --> 00:08:17.629 you actually make, depending which job you do. 00:08:18.439 --> 00:08:21.459 It's a risky way to price. It can be easy to 00:08:21.459 --> 00:08:23.199 standardise and it can be good for some types 00:08:23.199 --> 00:08:25.720 of businesses as well. So what's the difference 00:08:25.720 --> 00:08:30.199 between market -based pricing and time -based 00:08:30.199 --> 00:08:33.960 pricing? Time -based, you're just working on 00:08:33.960 --> 00:08:37.279 what the time is. Market -based is more what's 00:08:37.279 --> 00:08:40.679 the market willing to pay. Let's say you're selling, 00:08:40.720 --> 00:08:43.159 what's the product we can sell? A fuzzy widget. 00:08:43.419 --> 00:08:45.960 Fuzzy widget. Okay, so if we're selling a fuzzy 00:08:45.960 --> 00:08:48.539 widget and it takes us an hour to build it, and 00:08:48.539 --> 00:08:51.360 maybe $100 in materials. If we use our hourly 00:08:51.360 --> 00:08:54.480 rate of 100 and whatever, no markup of materials 00:08:54.480 --> 00:08:56.299 that say just make it easy for my mass, it's 00:08:56.299 --> 00:08:59.460 $200. Everyone followed? One hour plus $100, 00:09:00.320 --> 00:09:02.000 times allowing for the $100 for the hour, so 00:09:02.000 --> 00:09:06.440 200. So the market has other fuzzy widgets from 00:09:06.440 --> 00:09:08.960 other companies. Some inferior and some superior. 00:09:09.100 --> 00:09:11.480 Correct. Yep. Yep. And maybe fuzzy widgets go 00:09:11.480 --> 00:09:15.980 for $100. So should we now just charge 200? Definitely 00:09:15.980 --> 00:09:18.419 not. We probably should price it. around where 00:09:18.419 --> 00:09:20.460 the other ones are. And so probably the most 00:09:20.460 --> 00:09:23.039 common way we see that is the property market 00:09:23.039 --> 00:09:25.179 where people pay whatever they pay for a house 00:09:25.179 --> 00:09:27.899 based on who wants it. So it's not a value race. 00:09:28.500 --> 00:09:30.240 You say people value it more than others, but 00:09:30.240 --> 00:09:32.659 fundamentally the market as far as all the people 00:09:32.659 --> 00:09:35.240 will end up paying what is a reasonable price 00:09:35.240 --> 00:09:37.500 compared to other things on the market. Property 00:09:37.500 --> 00:09:40.080 is a good example because in a larger market, 00:09:40.720 --> 00:09:44.600 they're moving more towards auctions. Yeah, that's 00:09:44.600 --> 00:09:46.740 market based. Yeah. Well, it's got a few other 00:09:46.740 --> 00:09:48.759 things there, but you can, you can like, like 00:09:48.759 --> 00:09:51.360 anything. I think you can adjust. It's going 00:09:51.360 --> 00:09:52.759 to be market based, but you're going to have 00:09:52.759 --> 00:09:56.039 some, uh, competition factor into it. You're 00:09:56.039 --> 00:09:58.700 missing out. Yeah. So FOMO and a few other things 00:09:58.700 --> 00:10:01.059 that might affect the market price there at auction. 00:10:01.320 --> 00:10:02.759 It could go that way though. You might have only 00:10:02.759 --> 00:10:04.860 one person show up. Yeah. The neighbors just 00:10:04.860 --> 00:10:08.919 coming in to see what your decor is. Yeah. So 00:10:08.919 --> 00:10:11.009 I think the market price can. If you can understand 00:10:11.009 --> 00:10:13.049 the property side of things, it relates to everything 00:10:13.049 --> 00:10:14.950 else. What's this service work compared to what 00:10:14.950 --> 00:10:17.690 other people do? We had a client recently, actually. 00:10:17.750 --> 00:10:19.889 I remember they had their hourly rates set for 00:10:19.889 --> 00:10:21.070 a few years and they were saying, oh, we're losing 00:10:21.070 --> 00:10:22.509 this type of work, we're losing this type of 00:10:22.509 --> 00:10:24.690 work and we take too long on this because everyone 00:10:24.690 --> 00:10:27.610 else is charging two grand for this job that's, 00:10:27.610 --> 00:10:30.389 we are three grand based on our hours. It's okay. 00:10:30.549 --> 00:10:32.009 Well, if everyone's paying that, you either can't 00:10:32.009 --> 00:10:33.549 do the work or you've got to find a way to do 00:10:33.549 --> 00:10:36.629 it a whole lot faster. Or value add. Yeah, they 00:10:36.629 --> 00:10:38.879 found a way to do it a whole lot faster. So sometimes 00:10:38.879 --> 00:10:40.240 you can't charge because you won't win the work. 00:10:40.519 --> 00:10:42.000 What's the market going to pay? But if they could 00:10:42.000 --> 00:10:44.139 do it a whole lot faster, doesn't mean they should 00:10:44.139 --> 00:10:46.000 be cheaper. They should still be where the market 00:10:46.000 --> 00:10:48.539 is. Big brands pay a lot of money for efficiency 00:10:48.539 --> 00:10:51.299 experts to come in and go, how can we shave 10 00:10:51.299 --> 00:10:54.440 minutes off this process across a year? And the 00:10:54.440 --> 00:10:56.179 interesting thing is a lot of businesses doing 00:10:56.179 --> 00:10:59.480 the hourly rate markup kind of pricing. They 00:10:59.480 --> 00:11:01.299 make it more efficient. They drop all the prices 00:11:01.299 --> 00:11:02.539 because they have no idea what the market rate 00:11:02.539 --> 00:11:05.700 is. And they make themselves more efficient. 00:11:05.700 --> 00:11:07.659 They invest in that. They don't give you more 00:11:07.659 --> 00:11:10.379 money for it. I was just about to say that. Because 00:11:10.379 --> 00:11:12.840 market rate can help you boost your prices. So 00:11:12.840 --> 00:11:15.179 like a lot of people in the trade industry do 00:11:15.179 --> 00:11:18.039 the hourly based pricing, but then find out that 00:11:18.039 --> 00:11:20.899 their mates are $200 more expensive and they 00:11:20.899 --> 00:11:23.340 go, oh, well, I can bring mine up as well. But 00:11:23.340 --> 00:11:26.360 they'll only add it to the hourly based pricing 00:11:26.360 --> 00:11:30.299 based on the market rates. Yeah. I saw an example 00:11:30.299 --> 00:11:33.440 similar when the mining boom first kicked off. 00:11:33.720 --> 00:11:36.960 We're based here in Tasmania. A lot of tradesmen 00:11:36.960 --> 00:11:39.720 were able to get double what they were getting 00:11:39.720 --> 00:11:42.679 from a local service provider as an employee 00:11:42.679 --> 00:11:45.799 by doing fly -in, fly -out work. And therefore, 00:11:46.340 --> 00:11:48.139 to be able to employ a sparky here in Tassie, 00:11:48.220 --> 00:11:50.840 you had to bump your pay rate up by $40, $50 00:11:50.840 --> 00:11:53.100 an hour, which then flowed onto the customer. 00:11:53.500 --> 00:11:56.100 That's what the market did. Even though you're 00:11:56.100 --> 00:11:59.659 not digging mines here in Tassie right now, but 00:11:59.659 --> 00:12:02.500 because of the mining boom in Perth and in Queensland, 00:12:03.279 --> 00:12:05.120 the price of a tradie went through the roof. 00:12:05.360 --> 00:12:07.159 So what other pricing structures do we have? 00:12:07.240 --> 00:12:11.639 We have tiered. So that's the Spotify based one. 00:12:11.919 --> 00:12:14.779 I know I'm playing with a business model at the 00:12:14.779 --> 00:12:17.200 moment where you have a subscription base. So 00:12:17.200 --> 00:12:20.379 for example, clothing, high business, you can 00:12:20.379 --> 00:12:25.279 pay $200 a month and you get two hires of clothing. 00:12:25.419 --> 00:12:28.279 It's flat rate for that month, or you can pay 00:12:28.279 --> 00:12:32.340 $400 and you get five and you get. an accessory 00:12:32.340 --> 00:12:34.840 and then you pay a thousand dollars a month and 00:12:34.840 --> 00:12:37.100 you just got unlimited highs, for example. Sweet. 00:12:37.340 --> 00:12:39.120 And the old psychology of that was that people 00:12:39.120 --> 00:12:41.259 will always go the middle one. The majority of 00:12:41.259 --> 00:12:42.460 people go middle because they don't want to appear 00:12:42.460 --> 00:12:44.580 cheap and they don't want to pay a premium. You'll 00:12:44.580 --> 00:12:46.460 get the smaller amount that will go premium and 00:12:46.460 --> 00:12:47.899 you'll get the smaller amount that will go the 00:12:47.899 --> 00:12:49.759 cheapest one. That's like the regular coffee 00:12:49.759 --> 00:12:52.600 thing, isn't it? Yeah. I was going to say it's 00:12:52.600 --> 00:12:54.759 like anything though. I think this, using this 00:12:54.759 --> 00:12:57.629 word a lot in the last few weeks, complex. You're 00:12:57.629 --> 00:12:59.370 saying, yeah, people go the middle one because 00:12:59.370 --> 00:13:00.669 they don't want the high or the low or whatever, 00:13:00.789 --> 00:13:02.629 but you can also adjust the price of the middle 00:13:02.629 --> 00:13:05.730 one to make people go the high or the low. So 00:13:05.730 --> 00:13:07.669 like what Z was going to say with the coffee 00:13:07.669 --> 00:13:10.570 was that if you've got a coffee large for seven 00:13:10.570 --> 00:13:13.809 or regular for six and, oh sorry, regular for 00:13:13.809 --> 00:13:16.610 six and a small for five, then people will generally 00:13:16.610 --> 00:13:18.350 go the middle one unless they're greedy like 00:13:18.350 --> 00:13:20.710 me and get the large anyway. But if you make 00:13:20.710 --> 00:13:24.450 the regular 650, you'll find most people get 00:13:24.450 --> 00:13:27.750 the large. If you make the regular 550, most 00:13:27.750 --> 00:13:30.809 people go the regular. So you can, like anything 00:13:30.809 --> 00:13:32.549 that you don't have to sort of apply one principle, 00:13:32.649 --> 00:13:35.190 you can use multiple ones to sort of get the 00:13:35.190 --> 00:13:36.990 result you want. On your website, you put, this 00:13:36.990 --> 00:13:38.909 is the best deal, and it's the second to highest 00:13:38.909 --> 00:13:41.289 one. Most people will go the best deal. Yep. 00:13:41.830 --> 00:13:44.669 Seen lots of pricing strategies for cloud -based 00:13:44.669 --> 00:13:47.250 services where it's, this is the one that most 00:13:47.250 --> 00:13:48.730 people get. Hold on. I'm part of most people. 00:13:48.809 --> 00:13:51.440 I want to be most people. Like when they have 00:13:51.440 --> 00:13:54.299 a book and they say there's like five left, I'm 00:13:54.299 --> 00:13:57.799 like, oh well, gotta buy it. And so there's options 00:13:57.799 --> 00:14:00.139 and we're trying to relate it back to people 00:14:00.139 --> 00:14:01.600 like, okay, well, I don't have a subscription, 00:14:02.019 --> 00:14:03.399 blah, blah, blah. But you can relate to other 00:14:03.399 --> 00:14:06.340 things. So if you're selling, let's say instead 00:14:06.340 --> 00:14:09.019 of renting dresses on subscription, we're selling 00:14:09.019 --> 00:14:12.539 them. So we just retail, we can give people options. 00:14:13.259 --> 00:14:16.019 So here's one that's $20 that will sort of suit 00:14:16.019 --> 00:14:18.399 your needs. Here's one that's $60, here's one 00:14:18.399 --> 00:14:22.419 that's $200. blah, blah, blah. So if people go, 00:14:22.419 --> 00:14:24.320 oh, the $200 one I really like, but I can't afford 00:14:24.320 --> 00:14:27.220 it. Oh, there's this one we've got that's $120 00:14:27.220 --> 00:14:28.860 that has most of those that'll save you a bit 00:14:28.860 --> 00:14:32.159 of money rather than, oh, well, if you can afford 00:14:32.159 --> 00:14:35.860 $140, let's make the $200 one $140. Introduce 00:14:35.860 --> 00:14:37.940 something else that you still have margin on 00:14:37.940 --> 00:14:40.559 that suits better. We use that, the websites, 00:14:41.600 --> 00:14:45.100 primarily that pricing method is here's all the 00:14:45.100 --> 00:14:47.679 bells and whistles, full online shopping. you 00:14:47.679 --> 00:14:50.799 name it, it's all done SEO, custom copywriting, 00:14:51.000 --> 00:14:53.480 custom images, send a photographer out, that's 00:14:53.480 --> 00:14:55.639 going to cost you this. Here's the middle one, 00:14:55.759 --> 00:14:57.899 that's maybe five pages, a little bit of online, 00:14:58.679 --> 00:15:00.899 not so much custom, and then here's a one -page 00:15:00.899 --> 00:15:03.720 cookie cutter website. Most people buy the middle 00:15:03.720 --> 00:15:06.080 one. And hopefully everyone can follow the jumps 00:15:06.080 --> 00:15:07.679 around, but I think it's all related, but you've 00:15:07.679 --> 00:15:09.440 got loss leaders in the same sort of category 00:15:09.440 --> 00:15:11.740 where you'll see, you know, your junk mail and 00:15:11.740 --> 00:15:15.330 your letterbox from... any big box store and 00:15:15.330 --> 00:15:18.769 they'll have like oh this giant TV for $9 .99 00:15:18.769 --> 00:15:21.090 or whatever it is and they'll be making a loss 00:15:21.090 --> 00:15:22.789 on that but then people come to the store and 00:15:22.789 --> 00:15:24.370 they'll then naturally filter into whether they're 00:15:24.370 --> 00:15:27.289 a seven grand client or a $9 .99 client and either 00:15:27.289 --> 00:15:28.830 way people come in the door buying that they'll 00:15:28.830 --> 00:15:30.830 probably get something else. It's what adults 00:15:30.830 --> 00:15:34.350 can you do. So it's not so much related to setting 00:15:34.350 --> 00:15:37.009 pricing but when you're talking to someone or 00:15:37.009 --> 00:15:39.919 they're coming in. having flexibility. Lost leaders 00:15:39.919 --> 00:15:42.399 as a whole podcast on its own. That's a brilliant 00:15:42.399 --> 00:15:46.279 strategy. So how are we able to balance competitive 00:15:46.279 --> 00:15:50.059 pricing with profitability? So making sure that 00:15:50.059 --> 00:15:52.940 we did touch on this before with the efficiency 00:15:52.940 --> 00:15:55.539 gains, but how do we make sure that we're not 00:15:55.539 --> 00:15:58.460 chasing to be the cheapest? Because that's a 00:15:58.460 --> 00:16:02.600 race to the bottom. It's a viable strategy to 00:16:02.600 --> 00:16:05.000 be honest, but yeah. Chasing to the bottom. If 00:16:05.000 --> 00:16:07.750 you're a high volume, low price. That's the strategy 00:16:07.750 --> 00:16:10.049 in itself for the reject shop and the ship loads 00:16:10.049 --> 00:16:13.250 of the world. That's high volume low price. Yeah. 00:16:13.509 --> 00:16:15.409 So, but if you're trying to be the best quality, 00:16:15.470 --> 00:16:18.009 the best service and lowest price, obviously, 00:16:18.070 --> 00:16:20.909 yeah, it's a race to the bottom. So two out of 00:16:20.909 --> 00:16:24.809 three. So how else are we going to do it? So 00:16:24.809 --> 00:16:28.509 I, I know that we can do value, which we've also 00:16:28.509 --> 00:16:31.549 talked about. And then you've also got experience 00:16:31.549 --> 00:16:34.190 customer service that still sort of goes in the 00:16:34.190 --> 00:16:37.570 value pile. or unique fit, like value added. 00:16:37.950 --> 00:16:41.990 It is all value, who am I kidding? It's the market, 00:16:42.129 --> 00:16:43.870 what the market will pay. It's the perceived 00:16:43.870 --> 00:16:45.529 value of what something's worth. Profit's not 00:16:45.529 --> 00:16:48.669 a dirty word as well. Most people, if you're 00:16:48.669 --> 00:16:51.149 a service -based business, most people that you're 00:16:51.149 --> 00:16:53.730 going to be working for understand that we're 00:16:53.730 --> 00:16:56.470 a capitalist society. You can't just bill out 00:16:56.470 --> 00:16:58.809 at cost. If there's no profit, we don't have 00:16:58.809 --> 00:17:01.529 a business. I think the number one mistake people 00:17:01.529 --> 00:17:03.330 make with pricing is when they just don't bill 00:17:03.330 --> 00:17:05.940 people. It doesn't sound like a pricing issue, 00:17:06.000 --> 00:17:07.559 but it is. They sort of factor in the hourly 00:17:07.559 --> 00:17:08.900 rate of how much money they need to make and 00:17:08.900 --> 00:17:10.519 then half the time they're not billing or doing 00:17:10.519 --> 00:17:12.720 a special deal or, you know, they're giving people 00:17:12.720 --> 00:17:14.700 free coffee every now and then or, you know, 00:17:14.839 --> 00:17:16.539 like, oh, we'll just take this one home with 00:17:16.539 --> 00:17:19.740 me and then your margins gone. But yeah, how 00:17:19.740 --> 00:17:21.680 do you work out your prices and how do you know 00:17:21.680 --> 00:17:23.619 what you should be doing? I guess it's knowing 00:17:23.619 --> 00:17:25.380 what your expenses are and what your costs are 00:17:25.380 --> 00:17:27.519 and then what potential sales you can make and 00:17:27.519 --> 00:17:28.880 how much money do you need to make from each 00:17:28.880 --> 00:17:31.720 one to actually make a dollar. So that's where 00:17:31.720 --> 00:17:33.299 I love your spreadsheet thing that you get up. 00:17:33.529 --> 00:17:36.549 Yeah, it's amazing. Every time I see it, it just 00:17:36.549 --> 00:17:38.750 blows my mind. If we just flick this one up by 00:17:38.750 --> 00:17:41.509 0 .2 % three years from now, you're a millionaire. 00:17:43.470 --> 00:17:44.670 Yeah, if anyone wants that, just get in touch. 00:17:45.150 --> 00:17:47.269 But yeah, just working backwards a little bit 00:17:47.269 --> 00:17:49.769 to what something needs to be, I think it's always 00:17:49.769 --> 00:17:53.049 good. And then you can go from there and do your 00:17:53.049 --> 00:17:54.670 research of what are people currently paying. 00:17:55.170 --> 00:17:57.289 OK, well, we can't charge that much. Can we make 00:17:57.289 --> 00:17:59.589 some bells and whistles around it to make it 00:17:59.589 --> 00:18:02.329 worth that much? If we can't, what can we do? 00:18:02.490 --> 00:18:04.829 Maybe we can charge more than that. You know, 00:18:04.849 --> 00:18:06.930 I think it's just important to be a bit flexible 00:18:06.930 --> 00:18:09.569 rather than rigid. And you can use your hourly 00:18:09.569 --> 00:18:11.410 rate and mark up to figure out what most people 00:18:11.410 --> 00:18:12.869 are charging because most people are doing that. 00:18:13.089 --> 00:18:14.990 Or if you're in retail, you can look at what 00:18:14.990 --> 00:18:16.630 they're selling for online or wherever you want 00:18:16.630 --> 00:18:19.650 to do it. And who's your market as well? Like 00:18:19.650 --> 00:18:21.930 early adopters are going to pay more. It depends 00:18:21.930 --> 00:18:23.470 whether something's available at the shops and 00:18:23.470 --> 00:18:26.029 though as well. So, you know, work out what your 00:18:26.029 --> 00:18:27.950 costs are, work out what your sales can be and 00:18:27.950 --> 00:18:30.569 then how much you need to make per sale and go 00:18:30.569 --> 00:18:32.589 from there. But I think applying the, what will 00:18:32.589 --> 00:18:34.950 the market pay? What's the value that we have 00:18:34.950 --> 00:18:36.890 that no one else has? You know, there's a fee 00:18:36.890 --> 00:18:40.410 for that. How can you win a vote? Any efficiencies 00:18:40.410 --> 00:18:43.230 that we get, do we pass those on to get more 00:18:43.230 --> 00:18:46.049 sales or do we keep them because that's margin 00:18:46.049 --> 00:18:48.250 for us because we're good? What if I add a radio 00:18:48.250 --> 00:18:51.210 into my alarm clock? Might be quite a cool one 00:18:51.210 --> 00:18:53.769 on pricing. We've got those tables and they're 00:18:53.769 --> 00:18:55.349 very interesting. You can put in your profit 00:18:55.349 --> 00:18:57.670 and your profit margin as a percent. And then 00:18:57.670 --> 00:19:00.009 you can see if you decrease your prices by 10%. 00:19:00.140 --> 00:19:04.339 How much more in sales do you need to actually 00:19:04.339 --> 00:19:07.079 cover that loss of profit? Yep. And it's quite 00:19:07.079 --> 00:19:08.759 interesting for a lot of businesses, they'll 00:19:08.759 --> 00:19:10.619 do a 10 % discount and it means they have to 00:19:10.619 --> 00:19:12.559 sell 50 % more. And for most businesses, they 00:19:12.559 --> 00:19:14.420 don't. So they say, Oh, just get that work. I'll 00:19:14.420 --> 00:19:17.160 do a 10 % off. It's not much, but it's actually 00:19:17.160 --> 00:19:18.920 massive in the scheme of how much money the business 00:19:18.920 --> 00:19:22.500 makes. Just incredible to watch. I bark on about 00:19:22.500 --> 00:19:24.859 it all the time, but every time I see you put 00:19:24.859 --> 00:19:27.519 one of those things up on the big screen and 00:19:27.519 --> 00:19:30.079 try not to sound like a salesman. But this is 00:19:30.079 --> 00:19:32.740 good, keeps our nice things. It's so good to 00:19:32.740 --> 00:19:35.339 watch that the smallest change in your business, 00:19:36.200 --> 00:19:40.279 it's a snowball. Exponential changes. If you're 00:19:40.279 --> 00:19:42.460 measuring something for a building site and you're 00:19:42.460 --> 00:19:45.240 five mil out at the start of it, 20 metres down 00:19:45.240 --> 00:19:48.079 the line, you're three metres off. Same with 00:19:48.079 --> 00:19:49.539 your business, except we're talking about profit. 00:19:49.740 --> 00:19:51.339 Yeah, it's a good way to say it. Anyone who's 00:19:51.339 --> 00:19:53.180 listened to the podcast knows how much I love 00:19:53.180 --> 00:19:56.039 data and numbers and it makes me very excited. 00:19:56.859 --> 00:19:59.319 actually does make me excited to watch on a modeling 00:19:59.319 --> 00:20:02.240 day or when you have a client in and just seeing 00:20:02.240 --> 00:20:06.099 their face light up as well. And then also conversely, 00:20:06.099 --> 00:20:07.880 you see their face kind of go, oh yeah, I am 00:20:07.880 --> 00:20:09.640 kind of, if I keep going down this road, I'm 00:20:09.640 --> 00:20:11.380 going to be bankrupt in half a year. Well, what 00:20:11.380 --> 00:20:14.140 if I just change this number over here? It's 00:20:14.140 --> 00:20:18.059 awesome. It's just awesome. Yes. Pricing without 00:20:18.059 --> 00:20:21.700 knowing your numbers is, um, it's a gamble. So 00:20:21.700 --> 00:20:23.819 I just got that sheet up. Sorry, Z, to catch 00:20:23.819 --> 00:20:26.700 you on. No, you're fine. Go ahead. I am excited. 00:20:27.000 --> 00:20:29.740 So we just got the spreadsheet up and the last 00:20:29.740 --> 00:20:32.140 person's information is in it, which doesn't 00:20:32.140 --> 00:20:36.660 identify them. So we'll use it. But we used a 00:20:36.660 --> 00:20:40.819 one point seven nine million in sales and the 00:20:40.819 --> 00:20:43.759 cost to them was one point two million, which 00:20:43.759 --> 00:20:46.059 was a gross profit percentage of 33 percent. 00:20:46.059 --> 00:20:48.019 So it's probably similar to a lot of people. 00:20:48.039 --> 00:20:51.019 But, you know, reasonably normal as an example. 00:20:51.319 --> 00:20:55.859 So if we increase the prices by 10 percent, And 00:20:55.859 --> 00:20:58.579 we generally use this as an argument for, oh, 00:20:58.579 --> 00:21:00.460 I can't charge 10 % more, I'll lose too much, 00:21:00.640 --> 00:21:02.339 the market won't pay it. What's the cost per 00:21:02.339 --> 00:21:05.640 unit? Price per unit, in regards to 10%. Don't 00:21:05.640 --> 00:21:07.359 know what that was, but we're just saying we 00:21:07.359 --> 00:21:09.859 increase the prices by 10 % across the board, 00:21:09.920 --> 00:21:12.900 or on some things more, just an average of 10%. 00:21:12.900 --> 00:21:14.859 So the common feedback is I couldn't do that, 00:21:14.900 --> 00:21:16.359 I'm going to lose too much work, blah, blah, 00:21:16.420 --> 00:21:18.660 blah, I'm going to lose some clients, blah, blah, 00:21:18.660 --> 00:21:23.170 blah, blah. If your margin's 33%. then you can 00:21:23.170 --> 00:21:25.049 increase your prices by 10 % and you can afford 00:21:25.049 --> 00:21:28.710 to lose 25 % of your work before it affects your 00:21:28.710 --> 00:21:32.450 profit. One in four customers could walk away. 00:21:33.470 --> 00:21:35.410 So for most people that are snowed under not 00:21:35.410 --> 00:21:37.890 making enough money, not enough time in the day, 00:21:38.130 --> 00:21:39.849 sometimes that's because you're really good at 00:21:39.849 --> 00:21:43.670 what you do and some people will walk away. But 00:21:43.670 --> 00:21:45.750 if your margins lower, that gets bigger and bigger 00:21:45.750 --> 00:21:48.130 and bigger. So generally when people go, yeah, 00:21:48.170 --> 00:21:49.869 we'll lose a few clients, we'll be no good. You 00:21:49.869 --> 00:21:51.670 say, well, increase your price by 10%. You can 00:21:51.670 --> 00:21:54.390 lose one or four people and still make the same 00:21:54.390 --> 00:21:58.549 money for less costs as well. They're like, oh 00:21:58.549 --> 00:22:00.309 yeah, we can do that tomorrow. But if they don't 00:22:00.309 --> 00:22:05.869 lose anyone, they make 30 % more GP. So what's 00:22:05.869 --> 00:22:09.630 that? About $150 ,000 in their example. So the 00:22:09.630 --> 00:22:12.049 flip side is if they drop their prices by 10%. 00:22:12.049 --> 00:22:14.349 Yeah, this is the one that gets me. They need 00:22:14.349 --> 00:22:17.859 to... Oh, the volume's massive. to make the same 00:22:17.859 --> 00:22:21.519 money there to do 45 % more work. It's a no brainer, 00:22:21.539 --> 00:22:24.180 isn't it? Yeah. So I think it just goes back 00:22:24.180 --> 00:22:26.519 to knowing your numbers, what do you need to 00:22:26.519 --> 00:22:28.480 make and having a bit of understanding of that. 00:22:28.619 --> 00:22:30.460 But then also just knowing where the market sits, 00:22:30.539 --> 00:22:32.039 what the value is, where your difference is. 00:22:32.220 --> 00:22:34.099 It's a little bit complex, but once you sort 00:22:34.099 --> 00:22:37.180 of figure that out, then it's how do we standardise 00:22:37.180 --> 00:22:39.319 that? So going back to what Z was saying about 00:22:39.319 --> 00:22:42.099 you can justify a few things with higher prices 00:22:42.099 --> 00:22:44.099 or what not, your bells and whistles, people 00:22:44.099 --> 00:22:46.390 pay for service, they'll pay for... quality, 00:22:46.589 --> 00:22:50.170 they'll pay for appearance, they'll pay for reputation, 00:22:50.730 --> 00:22:53.710 they'll pay for their personal image. Convenience. 00:22:54.089 --> 00:22:56.329 So, you know, people buy Mercedes instead of 00:22:56.329 --> 00:23:00.630 Kias. It's not so much the car usually, it's 00:23:00.630 --> 00:23:04.250 the reputational benefits. The COVID experience 00:23:04.250 --> 00:23:06.450 showed that people will pay for convenience and 00:23:06.450 --> 00:23:10.890 that has extended it past the COVID times. People 00:23:10.890 --> 00:23:16.200 pay for faster shipping. Yeah. So it's what the 00:23:16.200 --> 00:23:18.460 point is that we never price and it's set, but 00:23:18.460 --> 00:23:20.960 we can adjust it with other factors which might 00:23:20.960 --> 00:23:23.960 be relevant to different people. And that's again, 00:23:24.519 --> 00:23:25.960 combining pricing strategies. Now we're giving 00:23:25.960 --> 00:23:28.079 people options in addition to something else, 00:23:28.180 --> 00:23:31.619 et cetera. But I think going back to things are 00:23:31.619 --> 00:23:34.180 always complex, but just being open with your 00:23:34.180 --> 00:23:36.259 pricing, is this worth it? Is someone going to 00:23:36.259 --> 00:23:39.180 pay it? What else can they want? Reducing someone's 00:23:39.180 --> 00:23:42.019 risk is massive. Warranties. Warranties, yeah. 00:23:42.119 --> 00:23:44.200 Warranties stems from that. And then having, 00:23:44.420 --> 00:23:46.200 going back to the first thing you'd said, some 00:23:46.200 --> 00:23:49.880 confidence to actually put it on the bill. Nice 00:23:49.880 --> 00:23:53.160 segue into a closing, that sounds like, was it? 00:23:53.279 --> 00:23:56.759 That was off. I was actually going to chat about 00:23:56.759 --> 00:24:00.329 discounts. No, we're not. Too early, Rog. I wasn't 00:24:00.329 --> 00:24:02.849 actually trying to buy those. It's a good example. 00:24:03.069 --> 00:24:04.430 We've talked with a few people recently. They're 00:24:04.430 --> 00:24:06.109 like, oh, we couldn't charge that. Like that's 00:24:06.109 --> 00:24:07.890 double what we're expecting to do for projects, 00:24:07.890 --> 00:24:10.390 you know? Yep. And they're basing it on their 00:24:10.390 --> 00:24:11.849 time and their hours and all this sort of stuff. 00:24:12.009 --> 00:24:13.769 I'm like, well, will people pay for a deck on 00:24:13.769 --> 00:24:16.630 their house? Like, oh, well, that was, no, I 00:24:16.630 --> 00:24:18.109 couldn't charge more than that. So is it worth 00:24:18.109 --> 00:24:20.430 $7 ,000? Oh yeah, deck's probably worth $7 ,000. 00:24:20.470 --> 00:24:23.589 Are you charging full? And then they're like, 00:24:23.609 --> 00:24:25.630 oh, I couldn't do that to them though. I feel 00:24:25.630 --> 00:24:28.789 like I'm ripping them off. I'm like, fix pricing. 00:24:28.970 --> 00:24:31.349 Have some confidence in your product. Yeah. Pricing 00:24:31.349 --> 00:24:33.849 strategy, fixed pricing. Like, okay, this is 00:24:33.849 --> 00:24:37.009 going to be upfront before they start. This price. 00:24:37.430 --> 00:24:39.230 Are you happy with that or not? They can decide. 00:24:39.289 --> 00:24:40.569 They can check it with the market. They can do 00:24:40.569 --> 00:24:42.349 all that. And if they're happy to buy it, happy 00:24:42.349 --> 00:24:44.430 days. That's another one of the things I like 00:24:44.430 --> 00:24:47.309 about your business advice. I seem to be blowing 00:24:47.309 --> 00:24:49.490 your tires up a lot. What have I done to you? 00:24:50.109 --> 00:24:53.829 Next episode, I think we're... Anyway, you're 00:24:53.829 --> 00:24:55.579 a straight shooter. the amount of times I've 00:24:55.579 --> 00:24:56.960 gone, I'm thinking about doing this, and you've 00:24:56.960 --> 00:24:58.039 just looked me straight in the eye and gone, 00:24:58.220 --> 00:25:00.420 well, that's dumb. I'm not going to make any 00:25:00.420 --> 00:25:03.660 money doing that. Stop thinking like that. Oh, 00:25:03.900 --> 00:25:05.740 yeah, actually, I probably needed that. Thanks. 00:25:06.359 --> 00:25:08.119 Yeah. Or conversely, it's like, why aren't you 00:25:08.119 --> 00:25:09.660 charging more for that? That's a really awesome 00:25:09.660 --> 00:25:12.240 service. Yeah. And see, it's the client's decision 00:25:12.240 --> 00:25:14.480 to pay for that or not pay for that. And we, 00:25:14.480 --> 00:25:16.380 we, we, most people filter it because of lack 00:25:16.380 --> 00:25:18.380 of confidence or whatever they've dealt with 00:25:18.380 --> 00:25:20.160 in the past. for a lot of people when they go 00:25:20.160 --> 00:25:21.279 out in their own business, start dealing with 00:25:21.279 --> 00:25:23.160 pricing that's four years old when they think 00:25:23.160 --> 00:25:25.720 they remember it, or 10 years old. But yeah, 00:25:26.259 --> 00:25:28.019 most of the clients I've ever had that have had 00:25:28.019 --> 00:25:31.579 that deck scenario or similar version, four months 00:25:31.579 --> 00:25:34.059 later, when the new quotes start coming through, 00:25:34.200 --> 00:25:36.140 they're like, instead of making $2 ,000 a month, 00:25:36.160 --> 00:25:37.980 they're making 20. And they're doing the same 00:25:37.980 --> 00:25:40.920 amount of work, and the clients are happy. And 00:25:40.920 --> 00:25:43.119 they're happy. And they're happy. Enjoying their 00:25:43.119 --> 00:25:45.779 life again. And it's just finding that point 00:25:45.779 --> 00:25:48.069 and having the confidence to do it. Yeah, getting 00:25:48.069 --> 00:25:51.750 over the roadblock of guilt is usually the hardest 00:25:51.750 --> 00:25:54.089 part about it, isn't it? The easiest way to get 00:25:54.089 --> 00:25:56.269 over guilt is to put some value in what you offer 00:25:56.269 --> 00:25:59.150 the world. But you're offering a service that 00:25:59.150 --> 00:26:00.769 no one else can offer. Yeah, but you need to 00:26:00.769 --> 00:26:03.750 be able to define that outcome before you even 00:26:03.750 --> 00:26:06.269 start that. Because if you don't know the value, 00:26:06.569 --> 00:26:09.509 so for example, you have someone who is... Well 00:26:09.509 --> 00:26:12.049 experienced, a well experienced electrician, 00:26:12.069 --> 00:26:14.410 for example, and they know all the nitty gritties 00:26:14.410 --> 00:26:16.509 and those sort of things as opposed to an apprentice. 00:26:16.549 --> 00:26:20.029 The apprentice is going to be cheaper, but for 00:26:20.029 --> 00:26:22.789 a complex job, you know that you're going to 00:26:22.789 --> 00:26:25.529 be far greater. Is your house going to burn down? 00:26:25.730 --> 00:26:27.690 Because they didn't put something in quite right. 00:26:28.410 --> 00:26:30.789 Maybe. Yeah, not bagging out the apprentice. 00:26:31.029 --> 00:26:32.789 If they clean up after themselves, oh no, they're 00:26:32.789 --> 00:26:36.190 an electrician. Sorry, sorry. Sorry to all the 00:26:36.190 --> 00:26:39.740 sparkies out there, but you know it's true. Are 00:26:39.740 --> 00:26:42.160 you nice to me and not electricians? What has 00:26:42.160 --> 00:26:45.400 happened? Without them, we wouldn't have light. 00:26:46.220 --> 00:26:49.859 Anyway, so the outcome, you need to understand 00:26:49.859 --> 00:26:51.960 the outcome before you even start that process. 00:26:52.059 --> 00:26:54.079 Because if you're feeling guilty, then you obviously 00:26:54.079 --> 00:26:57.380 don't know the value that you bring to the table. 00:26:58.539 --> 00:27:03.250 And so for example, if it's a website, You can 00:27:03.250 --> 00:27:07.150 say, I build a website for $5 ,000 or you can 00:27:07.150 --> 00:27:10.470 build a website that converts your visitors through 00:27:10.470 --> 00:27:13.470 to leads, which brings you X amount of dollars, 00:27:13.509 --> 00:27:18.990 for example. And if you get one sale for $10 00:27:18.990 --> 00:27:21.829 ,000, but I've charged you seven and a half for 00:27:21.829 --> 00:27:26.420 my job, then I've just paid for myself. Yeah. 00:27:26.599 --> 00:27:28.579 That's a good way to look at it. We talked about 00:27:28.579 --> 00:27:30.359 briefly before we started this podcast between 00:27:30.359 --> 00:27:32.920 the three of us, the podcast of Poster Syndrome, 00:27:33.160 --> 00:27:35.099 which was the most popular in history of our 00:27:35.099 --> 00:27:38.079 podcast. Oh, look that up. Things should get 00:27:38.079 --> 00:27:39.940 attached to the comments, not the comments or 00:27:39.940 --> 00:27:42.400 whatever on our actual podcast, because it's 00:27:42.400 --> 00:27:44.519 very relevant to pricing. We're talking about 00:27:44.519 --> 00:27:46.980 being confident and having doubt and feeling 00:27:46.980 --> 00:27:48.140 like you're ripping people off. And it doesn't 00:27:48.140 --> 00:27:49.200 matter how you do it. You can feel like people 00:27:49.200 --> 00:27:51.220 are ripping you off, but it comes back down to 00:27:51.220 --> 00:27:54.910 imposter syndrome. If you have those troubles, 00:27:55.109 --> 00:27:57.470 listen to imposter syndrome and that should help 00:27:57.470 --> 00:28:02.930 with lots of things. So once you understand that 00:28:02.930 --> 00:28:06.410 pricing for a flat fee probably isn't the best 00:28:06.410 --> 00:28:09.910 use of your time, then, I mean, my hope is that 00:28:09.910 --> 00:28:12.069 they then turn around and they're not just exhausted 00:28:12.069 --> 00:28:13.769 from the amount of hours that they're trying 00:28:13.769 --> 00:28:17.170 to bill out. They're able to work four hours, 00:28:17.849 --> 00:28:20.630 take a break, work another four hours instead 00:28:20.630 --> 00:28:24.000 of just back to back to back to back. because 00:28:24.000 --> 00:28:26.720 they're giving energy to that job rather than 00:28:26.720 --> 00:28:29.039 just showing up and working the hour, for example. 00:28:29.180 --> 00:28:30.480 When you're getting paid well, you're generally 00:28:30.480 --> 00:28:32.619 a lot happier to be there. Yeah. And when your 00:28:32.619 --> 00:28:34.019 client says something that's slightly anoying, 00:28:34.039 --> 00:28:35.539 you've heard a million times before, if you're 00:28:35.539 --> 00:28:37.240 getting paid well, you just, yeah, happy days. 00:28:37.779 --> 00:28:39.359 When you don't make enough money and they ask 00:28:39.359 --> 00:28:41.200 for anything, it feels like they're personally 00:28:41.200 --> 00:28:44.359 attacking you. So it sounds like you fix your 00:28:44.359 --> 00:28:46.700 prices is your own issue, not theirs. Oh, very 00:28:46.700 --> 00:28:50.089 much so. 100 % relate to that when you said you're 00:28:50.089 --> 00:28:52.029 charging not enough for websites, and that's 00:28:52.029 --> 00:28:56.309 why you hate them. Yeah. I might lift my prices. 00:28:56.569 --> 00:28:58.029 I hope that's changed. And you were doing it 00:28:58.029 --> 00:28:59.730 because of a public service. Yeah. You were like, 00:28:59.730 --> 00:29:01.230 oh, people are getting ripped off of websites. 00:29:01.230 --> 00:29:03.170 Yeah, yeah. Don't do it cheap and affordably. 00:29:03.309 --> 00:29:05.210 Turns out they weren't getting ripped off. It's 00:29:05.210 --> 00:29:07.250 what you got to charge to enjoy your life. Yeah. 00:29:07.769 --> 00:29:09.230 And you were helping everyone. You could be angry 00:29:09.230 --> 00:29:11.289 as doing it because no one appreciated it. But 00:29:11.289 --> 00:29:13.630 going to that is sometimes if you don't bill 00:29:13.630 --> 00:29:15.549 people, they don't think it's good. So going 00:29:15.549 --> 00:29:18.299 to talking about a deck before. Yep. Three grand 00:29:18.299 --> 00:29:19.880 decks, no one here is as good as a seven grand 00:29:19.880 --> 00:29:22.019 deck. We all know that. No, a hundred percent. 00:29:22.119 --> 00:29:23.680 Yeah. So now you're charging three grand for 00:29:23.680 --> 00:29:25.200 a deck that's the same as a seven grand deck. 00:29:25.299 --> 00:29:26.619 You're just taking away the bragging rights for 00:29:26.619 --> 00:29:28.259 your client. Now all I want to do is watch the 00:29:28.259 --> 00:29:31.740 New Zealand deck. They must have sold a heap. 00:29:33.099 --> 00:29:36.859 Google it. Yep. So let's say someone's come around 00:29:36.859 --> 00:29:40.359 to understanding the value based pricing. The 00:29:40.359 --> 00:29:42.619 combination of everything. Well, yes, combination 00:29:42.619 --> 00:29:46.700 and understood what it is that they bring to 00:29:46.700 --> 00:29:49.930 the table. that probably the next barrier will 00:29:49.930 --> 00:29:52.509 be the pushback of some clients, which we have 00:29:52.509 --> 00:29:56.910 talked about if you lose one in four clients. 00:29:57.069 --> 00:29:59.670 It can be good. Could be a good thing. Depends 00:29:59.670 --> 00:30:01.450 on your numbers. That's the general example we 00:30:01.450 --> 00:30:04.089 used before, by the way. But yes, do expect that 00:30:04.089 --> 00:30:08.349 probably some clients will push back and they 00:30:08.349 --> 00:30:10.869 will just ask, why don't you just offer a price? 00:30:11.230 --> 00:30:15.410 But you need to show them what that result is 00:30:15.410 --> 00:30:18.390 worth. That's a pretty A good rule of thumb is 00:30:18.390 --> 00:30:20.569 easier to lower your price than raise your price. 00:30:20.750 --> 00:30:22.950 So if you are just starting out as a new business 00:30:22.950 --> 00:30:26.130 and you think you're not charging enough before 00:30:26.130 --> 00:30:29.609 you even start publicizing your prices at an 00:30:29.609 --> 00:30:35.049 extra 20%, you can always come down. It's very 00:30:35.049 --> 00:30:37.230 difficult to lift unless there's a justifiable 00:30:37.230 --> 00:30:40.170 reason. You'd generally be surprised. Someone 00:30:40.170 --> 00:30:42.549 was brave recently. They went and bought a coffee 00:30:42.549 --> 00:30:46.259 van and set prices, et cetera. Charge market 00:30:46.259 --> 00:30:47.740 rate. Oh, no, because we won't have this and 00:30:47.740 --> 00:30:50.539 this. We don't have to. I don't write this. Yeah, 00:30:50.799 --> 00:30:53.319 do it. And then they've been wildly successful. 00:30:53.779 --> 00:30:56.339 The markup on coffee is outstanding. And he was, 00:30:56.339 --> 00:30:58.119 he didn't want to rip people off all those common 00:30:58.119 --> 00:31:00.240 things. And we did a budget for him. So I said, 00:31:00.319 --> 00:31:01.900 well, here's your price, what you want to do. 00:31:01.920 --> 00:31:03.740 And here's the price I'm suggesting. And it was 00:31:03.740 --> 00:31:05.640 like double the net profit. Yeah. And you know, 00:31:05.640 --> 00:31:10.859 we'll do that. You can always discount it if 00:31:10.859 --> 00:31:13.480 you want to. Yeah. But you can never get more 00:31:13.480 --> 00:31:16.799 money. And having the yearly discount or a seasonal 00:31:16.799 --> 00:31:19.000 discount every now and then, when you are pricing 00:31:19.000 --> 00:31:22.799 at a point which gives you enough profit, that 00:31:22.799 --> 00:31:24.640 can be a strategy as well when the market turns. 00:31:25.140 --> 00:31:27.359 Going back to what Zee said, because we've just 00:31:27.359 --> 00:31:30.680 cut her off and changed topic. But yeah, the 00:31:30.680 --> 00:31:32.920 pushback when you do change your prices. It's 00:31:32.920 --> 00:31:34.079 important to understand that if people won't 00:31:34.079 --> 00:31:37.359 pay it and you need them to pay it, there's a 00:31:37.359 --> 00:31:39.299 lot of service there. If they won't pay it and 00:31:39.299 --> 00:31:41.980 other people will. Then losing clients to get 00:31:41.980 --> 00:31:44.380 other clients freeing you up for better ones. 00:31:44.619 --> 00:31:46.819 That's a good thing. Yeah, they're not your client. 00:31:46.980 --> 00:31:47.980 If you've got clients that don't want to pay 00:31:47.980 --> 00:31:50.539 you, then they're probably wasting your time 00:31:50.539 --> 00:31:52.619 and upset, not paying you on time or whatever. 00:31:52.960 --> 00:31:54.519 Where you've got clients who really want to deal 00:31:54.519 --> 00:31:56.940 with you and very happy for you, that will be 00:31:56.940 --> 00:31:59.140 happy to pay it. So sometimes losing clients 00:31:59.140 --> 00:32:02.200 frees up space for better clients. But at the 00:32:02.200 --> 00:32:03.740 end of the day, you can't have a model where 00:32:03.740 --> 00:32:05.480 you're not making money because you're going 00:32:05.480 --> 00:32:08.539 to be unhappy and that's no good. Who's your 00:32:08.539 --> 00:32:11.450 best client? What's that avatar look like? It's 00:32:11.450 --> 00:32:14.109 a podcast there somewhere. Pretty sure we've 00:32:14.109 --> 00:32:16.990 done something like that. But yeah, your job's 00:32:16.990 --> 00:32:20.970 not to convince them, it's just to clarify your 00:32:20.970 --> 00:32:23.829 value so that the price actually makes sense. 00:32:24.069 --> 00:32:26.849 Because you do deserve to be paid for the value 00:32:26.849 --> 00:32:29.269 that you bring, not just the time you spend. 00:32:29.670 --> 00:32:32.369 I do think that a lot of that does come from 00:32:32.369 --> 00:32:36.420 what is ingrained in you. As a child, like you 00:32:36.420 --> 00:32:38.859 spend the eight hours in the office, you get 00:32:38.859 --> 00:32:41.140 paid for those eight hours, you get paid for 00:32:41.140 --> 00:32:42.440 your 40 hour a week, you go home, that's it. 00:32:42.440 --> 00:32:44.759 Makes sense to everyone. Yeah. Yeah. And that's 00:32:44.759 --> 00:32:46.779 the way we've always done it. It is the way we've 00:32:46.779 --> 00:32:48.599 always done it. Yeah. But we're all so ingrained 00:32:48.599 --> 00:32:49.880 together in the supermarket and buy a bill for 00:32:49.880 --> 00:32:52.119 $5 or $6 or whatever the price is at the time. 00:32:52.140 --> 00:32:54.779 Yeah. So all we do understand if an exotic house 00:32:54.779 --> 00:32:56.380 is worth this, we can't just say, oh, it was 00:32:56.380 --> 00:32:59.240 built 10 years ago for 20 hours, you know, like 00:32:59.240 --> 00:33:02.400 it doesn't work like that. Yep. Quick question. 00:33:02.809 --> 00:33:07.170 Do you see a industry or a product or a service 00:33:07.170 --> 00:33:11.869 that would benefit more from an hourly rate billing 00:33:11.869 --> 00:33:16.210 structure? Yeah, I think we've got a large amount 00:33:16.210 --> 00:33:20.150 of labor and reasonable controls in place. It's 00:33:20.150 --> 00:33:21.869 nice and transparent for everyone. If everyone's 00:33:21.869 --> 00:33:24.710 happy with that, it's quite good. A labour hire 00:33:24.710 --> 00:33:26.130 is a very obvious one because you're selling 00:33:26.130 --> 00:33:28.029 an hour for an hour, you know, but things are 00:33:28.029 --> 00:33:29.990 always complex. So when we say value price and 00:33:29.990 --> 00:33:31.470 it's probably more ethical than an hourly rate, 00:33:31.569 --> 00:33:33.089 but sometimes an hourly rate probably is more 00:33:33.089 --> 00:33:34.529 ethical. Hey, we don't know how long that's got 00:33:34.529 --> 00:33:37.230 to take. It could be this, it could be that. 00:33:37.430 --> 00:33:40.069 Maybe you've got long term relationships with 00:33:40.069 --> 00:33:41.450 customers, you're happy with your hourly rate 00:33:41.450 --> 00:33:43.390 and they're happy with what you're doing. You 00:33:43.390 --> 00:33:45.170 know, it's easy for everyone. I've done that 00:33:45.170 --> 00:33:47.529 in the past with custom web billers. I'm like, 00:33:47.529 --> 00:33:49.849 well, here's the price. Here's a contract price, 00:33:49.849 --> 00:33:52.059 but I think you might. We're not sure. Yeah, 00:33:52.059 --> 00:33:53.759 you might get better value from an hourly rate 00:33:53.759 --> 00:33:55.640 because I think it's going to take roughly this 00:33:55.640 --> 00:33:58.660 long. But it could go either way. Yeah. So it's 00:33:58.660 --> 00:34:01.099 not that. But I think it's just it's just using 00:34:01.099 --> 00:34:03.579 them all in combination. And as I mentioned before, 00:34:03.599 --> 00:34:05.119 it's like sometimes you probably don't want flat 00:34:05.119 --> 00:34:07.400 rates. Maybe you want to look at each show, but 00:34:07.400 --> 00:34:09.360 sometimes maybe flat rates is a good part of 00:34:09.360 --> 00:34:11.400 the mix. You know, you win some, you lose some. 00:34:12.199 --> 00:34:15.219 So it's just whatever works. Have a conversation. 00:34:16.340 --> 00:34:18.820 But an hourly rate makes sense when you've got 00:34:18.820 --> 00:34:21.869 a bit of a scale. You've got People that can't 00:34:21.869 --> 00:34:25.409 have a bit of a logical decision, can't make 00:34:25.409 --> 00:34:28.369 one, sorry. But you need to look at that with 00:34:28.369 --> 00:34:31.090 some other strategies at the same time because 00:34:31.090 --> 00:34:34.250 any strategy just by itself might not be too 00:34:34.250 --> 00:34:37.329 effective aside from market rate, which is it's 00:34:37.329 --> 00:34:40.130 fine as long as people wouldn't pay it. So I 00:34:40.130 --> 00:34:43.530 think what we're trying to say is that all of 00:34:43.530 --> 00:34:45.769 these pricing models are not necessarily wrong, 00:34:46.070 --> 00:34:49.110 can be used. differently for the benefit of your 00:34:49.110 --> 00:34:52.130 business. That's the art. Yes. Just need to know 00:34:52.130 --> 00:34:54.449 how to do it and where your numbers are. Definitely 00:34:54.449 --> 00:34:58.570 needs to know your numbers. I know a guy. But 00:34:58.570 --> 00:35:01.630 probably best to reflect on that at the end of 00:35:01.630 --> 00:35:05.590 this podcast or whenever, because we do think 00:35:05.590 --> 00:35:09.309 that people should respect your skill, not necessarily 00:35:09.309 --> 00:35:11.989 just your availability. That's not really fair 00:35:11.989 --> 00:35:14.670 on you. And if you are the person with the skill 00:35:14.670 --> 00:35:17.519 and expertise running your business, then then 00:35:17.519 --> 00:35:20.760 you own that. Price accordingly. Yeah, exactly. 00:35:21.400 --> 00:35:23.739 So just make sure that you're not affordable 00:35:23.739 --> 00:35:26.440 to everyone because that's not going to be... 00:35:26.440 --> 00:35:27.900 Don't be affordable to everyone, but it'd be 00:35:27.900 --> 00:35:29.760 great value to your good clients. Yeah, exactly. 00:35:30.219 --> 00:35:33.000 Yeah. Be invaluable to the right people. That's 00:35:33.000 --> 00:35:35.860 the one. All right. So we'll wrap it up there. 00:35:36.139 --> 00:35:38.659 If you would like some more information, just 00:35:38.659 --> 00:35:41.559 shoot us a message because we do have some resources 00:35:41.559 --> 00:35:45.599 that you can use to price. effectively for your 00:35:45.599 --> 00:35:47.679 business. And if you need help, just give us 00:35:47.679 --> 00:35:49.739 a call, but we'll wrap up the podcast there. 00:35:50.000 --> 00:35:51.719 Thanks everyone. Bye. Bye.