Welcome to the Business Abundance Podcast, providing
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www .businessabundance .online. Hello, welcome
back to the Business Abundance Podcast. Today,
we're diving into one of the most misunderstood
but probably powerful aspects of running a profitable
business. and sustainable business, and it is
pricing. So whether you're a consultant, a product
based business or somewhere in between, we will
be talking through pricing strategies that hopefully
maximize your profit and keep your customers
loyal. What do you reckon, team? That's amazing.
Sounds good. Yeah. Awesome. So let's chat about
the different pricing models. Ian, do you want
to listen for us? I have no idea. I'm going to
learn as much as everyone else on this one. It's
going to be great. I can start with one. Yeah,
go for it. We can charge for our hours. We can
charge for our materials. Yep. And add a little
bit onto that. Ah, yeah. So I mark up. Yes. Mark
up on materials. I charge a rate for our hours.
What do they call that one? Hourly rate. Hourly
rate, yeah. So they might have done a fancy term.
It probably is. There's value based. Pricing,
which we'll probably do a bit of a deep dive
into, which is pricing based on the perceived
value of your services or products to the customer.
You've got tiered pricing. So that's like the
basic standard premium subscriptions, which means
that you can cater to different budget levels,
I guess. Like Netflix? Yeah. You think Netflix
can pay less? Yeah. So I mean, Apple, that does
value -based pricing because you're not... paying
for the materials as such, you're paying for
the, how fancy it looks. Status quo. Yeah. And
then you've got Spotify, for example, that uses
the tiered pricing based on your subscription,
whether it's family or whether it's individual
or whether it's student. I can't quite remember.
There's so many. I jumped on the family one.
So I think we've got a family one. So I like
the idea of a value -based pricing model. So
Let's just start off with what the ethical issues
are when it comes to time -based pricing, because
a lot of people do time -based pricing and sometimes
they're shooting themselves in the foot. So Rowan,
do you want to talk about that? Yeah, we can
do that. I guess we've also got horses for courses
scenario. we can, you know, time -based billing
sometimes is probably the best thing to do. But
maybe if we're going to go to value pricing,
I was going to add one first, but like market
-based pricing. So like what will the market
pay? Which is a different number. Again, we can't,
it's a bit harder to calculate, but it's only
worth what people will pay for it. Yeah. Yep.
Yeah. Sometimes people are like, Oh, I can't
charge for that. It's like, can you? Can't you?
I worked it out and no one's going to pay for
it. It's like, well, okay. Well, what will the
market pay? They'll pay this. Are you happy to
do it? No, okay, better not sell it. But yeah,
so I had that once that list to talk about, but
value -based pricing, I think the concept is
that you charge based on the result to the client.
So for example, if you're an hourly biller and
you're doing one hour's worth of work, you charge
$100 per hour. Instead of giving someone a bill
of $100, you might give them a bill of 500. But
the only way that that would be economically
viable, and by economically viable I mean people
will pay you for it, is if the result to them
is far greater than the 500. So for some people
that have more skills and experience or can do
work a lot faster than other people, so if you're
a landscaper for example and you work, you know,
you've been doing it for 15 years and your body's
not broken, you're still pretty good, you've
got all the tools and a bit of know how, you'll
probably be faster than the next guy, but if
you told someone you're charged, $150 an hour,
rather than they're 75, they're probably not
going to hire you. But if you said to do your
backyard, it's going to be two and a half grand,
they'll probably compare it to the other guy
and go, oh, that's about right. Yep. So that's
probably the easiest way to explain value based
pricing. Is that the old engineer story of the
65 year old about to retire engineer comes in
to fix something that no one else has been able
to fix. And he comes in and he hits it once with
a hammer and now it's fixed and he gives him
a bill for $15 ,000. They say, well, you only
hit it once with a hammer. He says, no, you're
not paying for that. You're paying for me knowing
where to hit it. Yeah. Um, and so I think, uh,
people struggle to sort of articulate that to
clients or, or when you're saying the ethical
issues and things like that. Sleep at night if
they send someone a big bill, but at the end
of the day, sometimes people want something done
better, faster, smarter, and they just care about
the result. And if you're one of those people
that can get that result quickly, faster and
more confidently. It's pretty hard to say I'm
worth $2 ,000 an hour and no one's going to pay
you. Even if you're one of the best lawyers in
let's say New York City, you're the best lawyer
there, no one's going to pay you $15 ,000 per
hour. Even if you're worth it, especially to
those companies that are worth billions or you're
more than playing with pretty large transactions.
But they'll be happy to pay you $100 ,000 to
do a project for them, no problems. So that's
an interesting one. Why do you think the default
is to do the hourly based pricing? It's easy
to calculate. Yeah. I know when I first started
out doing logo design and websites, you're projecting
here. I am a little bit, but I've also worked
with a lot of clients who feel like they can't
charge more. It's, it's a self -esteem thing.
You're valuing yourself at the 15 % markup that
you put on the materials or whatever it is when
you materials plus what you assume will be your
alley. That's all you're valuing yourself to
be. A hundred percent. Yeah. So I think it's
can be that's probably relating to how much you're
charging people becomes the issue of confidence.
They're going back to why do people use ours
and material or markup. It's just easy to calculate.
Like if we're on a wage, we get paid per hour.
You know, if we're paying a contractor, we pay
them per hour. When you see people, it's per
hour. And you know, like it's a lot of similarities.
So it's also good if you You know, you need to
earn a certain amount of money if you go to someone's
house and you start working or you're doing a
job for someone charging per hour. If you mark
something up, you still get the bill and then,
but then you've got the arguments over how long
should have it taken, all this sort of stuff.
So it's easy to justify the price as well. If
you go, well, this took us six hours to do this.
Like I look at my mechanic bill every time I
take the Volkswagen in. Yeah. So that took four
hours. Yeah. But how do you know that six hours
was worthwhile? You don't. So that leads to a
bit of the ethical thing that C jumps straight
to. You can look at it a couple of ways. Fixed
price servicing, I know Toyota do a lot of that
with their vehicles. So they'll say, here's a
new car and here's the fixed price servicing
for the next however long. And most people prefer
to, yeah, at least I know what I'm up for. I'm
not sending to mechanic and who knows what I'm
going to get. And that's a really good example
of value -based, the single service is worth
this. If we do it fast, they're great for us.
If we do it slow, bad for us, but then for the
client, it's the same cost either way. And that's
got to be reasonable. compared to other options.
But I guess the ethical side is that if you're
an hourly billing, the best result for you is
working more hours because you get paid more.
The best result for the client is you taking
a shorter amount of time because they have to
pay less. So it's generally just there's no win
-win there. Yeah, if you're fast and skilled,
you make less. So you're kind of hurting yourself.
Yeah, and the clients love it. But then suddenly
you're overworked and underpaid. So it's not
fair to you or your clients. Well, you've bought
yourself a job in that situation, haven't you,
really? Yeah. And then why do people do it is
if you've got six people working in your business
and you need to price something, pretty easy
to calculate and pretty easy to standardise.
But we've got some great examples we do with
people on the consulting side where we show them
you price that way, you can have four jobs priced
exactly the same way and wildly different examples
over the course of the year of how much money
you actually make, depending which job you do.
It's a risky way to price. It can be easy to
standardise and it can be good for some types
of businesses as well. So what's the difference
between market -based pricing and time -based
pricing? Time -based, you're just working on
what the time is. Market -based is more what's
the market willing to pay. Let's say you're selling,
what's the product we can sell? A fuzzy widget.
Fuzzy widget. Okay, so if we're selling a fuzzy
widget and it takes us an hour to build it, and
maybe $100 in materials. If we use our hourly
rate of 100 and whatever, no markup of materials
that say just make it easy for my mass, it's
$200. Everyone followed? One hour plus $100,
times allowing for the $100 for the hour, so
200. So the market has other fuzzy widgets from
other companies. Some inferior and some superior.
Correct. Yep. Yep. And maybe fuzzy widgets go
for $100. So should we now just charge 200? Definitely
not. We probably should price it. around where
the other ones are. And so probably the most
common way we see that is the property market
where people pay whatever they pay for a house
based on who wants it. So it's not a value race.
You say people value it more than others, but
fundamentally the market as far as all the people
will end up paying what is a reasonable price
compared to other things on the market. Property
is a good example because in a larger market,
they're moving more towards auctions. Yeah, that's
market based. Yeah. Well, it's got a few other
things there, but you can, you can like, like
anything. I think you can adjust. It's going
to be market based, but you're going to have
some, uh, competition factor into it. You're
missing out. Yeah. So FOMO and a few other things
that might affect the market price there at auction.
It could go that way though. You might have only
one person show up. Yeah. The neighbors just
coming in to see what your decor is. Yeah. So
I think the market price can. If you can understand
the property side of things, it relates to everything
else. What's this service work compared to what
other people do? We had a client recently, actually.
I remember they had their hourly rates set for
a few years and they were saying, oh, we're losing
this type of work, we're losing this type of
work and we take too long on this because everyone
else is charging two grand for this job that's,
we are three grand based on our hours. It's okay.
Well, if everyone's paying that, you either can't
do the work or you've got to find a way to do
it a whole lot faster. Or value add. Yeah, they
found a way to do it a whole lot faster. So sometimes
you can't charge because you won't win the work.
What's the market going to pay? But if they could
do it a whole lot faster, doesn't mean they should
be cheaper. They should still be where the market
is. Big brands pay a lot of money for efficiency
experts to come in and go, how can we shave 10
minutes off this process across a year? And the
interesting thing is a lot of businesses doing
the hourly rate markup kind of pricing. They
make it more efficient. They drop all the prices
because they have no idea what the market rate
is. And they make themselves more efficient.
They invest in that. They don't give you more
money for it. I was just about to say that. Because
market rate can help you boost your prices. So
like a lot of people in the trade industry do
the hourly based pricing, but then find out that
their mates are $200 more expensive and they
go, oh, well, I can bring mine up as well. But
they'll only add it to the hourly based pricing
based on the market rates. Yeah. I saw an example
similar when the mining boom first kicked off.
We're based here in Tasmania. A lot of tradesmen
were able to get double what they were getting
from a local service provider as an employee
by doing fly -in, fly -out work. And therefore,
to be able to employ a sparky here in Tassie,
you had to bump your pay rate up by $40, $50
an hour, which then flowed onto the customer.
That's what the market did. Even though you're
not digging mines here in Tassie right now, but
because of the mining boom in Perth and in Queensland,
the price of a tradie went through the roof.
So what other pricing structures do we have?
We have tiered. So that's the Spotify based one.
I know I'm playing with a business model at the
moment where you have a subscription base. So
for example, clothing, high business, you can
pay $200 a month and you get two hires of clothing.
It's flat rate for that month, or you can pay
$400 and you get five and you get. an accessory
and then you pay a thousand dollars a month and
you just got unlimited highs, for example. Sweet.
And the old psychology of that was that people
will always go the middle one. The majority of
people go middle because they don't want to appear
cheap and they don't want to pay a premium. You'll
get the smaller amount that will go premium and
you'll get the smaller amount that will go the
cheapest one. That's like the regular coffee
thing, isn't it? Yeah. I was going to say it's
like anything though. I think this, using this
word a lot in the last few weeks, complex. You're
saying, yeah, people go the middle one because
they don't want the high or the low or whatever,
but you can also adjust the price of the middle
one to make people go the high or the low. So
like what Z was going to say with the coffee
was that if you've got a coffee large for seven
or regular for six and, oh sorry, regular for
six and a small for five, then people will generally
go the middle one unless they're greedy like
me and get the large anyway. But if you make
the regular 650, you'll find most people get
the large. If you make the regular 550, most
people go the regular. So you can, like anything
that you don't have to sort of apply one principle,
you can use multiple ones to sort of get the
result you want. On your website, you put, this
is the best deal, and it's the second to highest
one. Most people will go the best deal. Yep.
Seen lots of pricing strategies for cloud -based
services where it's, this is the one that most
people get. Hold on. I'm part of most people.
I want to be most people. Like when they have
a book and they say there's like five left, I'm
like, oh well, gotta buy it. And so there's options
and we're trying to relate it back to people
like, okay, well, I don't have a subscription,
blah, blah, blah. But you can relate to other
things. So if you're selling, let's say instead
of renting dresses on subscription, we're selling
them. So we just retail, we can give people options.
So here's one that's $20 that will sort of suit
your needs. Here's one that's $60, here's one
that's $200. blah, blah, blah. So if people go,
oh, the $200 one I really like, but I can't afford
it. Oh, there's this one we've got that's $120
that has most of those that'll save you a bit
of money rather than, oh, well, if you can afford
$140, let's make the $200 one $140. Introduce
something else that you still have margin on
that suits better. We use that, the websites,
primarily that pricing method is here's all the
bells and whistles, full online shopping. you
name it, it's all done SEO, custom copywriting,
custom images, send a photographer out, that's
going to cost you this. Here's the middle one,
that's maybe five pages, a little bit of online,
not so much custom, and then here's a one -page
cookie cutter website. Most people buy the middle
one. And hopefully everyone can follow the jumps
around, but I think it's all related, but you've
got loss leaders in the same sort of category
where you'll see, you know, your junk mail and
your letterbox from... any big box store and
they'll have like oh this giant TV for $9 .99
or whatever it is and they'll be making a loss
on that but then people come to the store and
they'll then naturally filter into whether they're
a seven grand client or a $9 .99 client and either
way people come in the door buying that they'll
probably get something else. It's what adults
can you do. So it's not so much related to setting
pricing but when you're talking to someone or
they're coming in. having flexibility. Lost leaders
as a whole podcast on its own. That's a brilliant
strategy. So how are we able to balance competitive
pricing with profitability? So making sure that
we did touch on this before with the efficiency
gains, but how do we make sure that we're not
chasing to be the cheapest? Because that's a
race to the bottom. It's a viable strategy to
be honest, but yeah. Chasing to the bottom. If
you're a high volume, low price. That's the strategy
in itself for the reject shop and the ship loads
of the world. That's high volume low price. Yeah.
So, but if you're trying to be the best quality,
the best service and lowest price, obviously,
yeah, it's a race to the bottom. So two out of
three. So how else are we going to do it? So
I, I know that we can do value, which we've also
talked about. And then you've also got experience
customer service that still sort of goes in the
value pile. or unique fit, like value added.
It is all value, who am I kidding? It's the market,
what the market will pay. It's the perceived
value of what something's worth. Profit's not
a dirty word as well. Most people, if you're
a service -based business, most people that you're
going to be working for understand that we're
a capitalist society. You can't just bill out
at cost. If there's no profit, we don't have
a business. I think the number one mistake people
make with pricing is when they just don't bill
people. It doesn't sound like a pricing issue,
but it is. They sort of factor in the hourly
rate of how much money they need to make and
then half the time they're not billing or doing
a special deal or, you know, they're giving people
free coffee every now and then or, you know,
like, oh, we'll just take this one home with
me and then your margins gone. But yeah, how
do you work out your prices and how do you know
what you should be doing? I guess it's knowing
what your expenses are and what your costs are
and then what potential sales you can make and
how much money do you need to make from each
one to actually make a dollar. So that's where
I love your spreadsheet thing that you get up.
Yeah, it's amazing. Every time I see it, it just
blows my mind. If we just flick this one up by
0 .2 % three years from now, you're a millionaire.
Yeah, if anyone wants that, just get in touch.
But yeah, just working backwards a little bit
to what something needs to be, I think it's always
good. And then you can go from there and do your
research of what are people currently paying.
OK, well, we can't charge that much. Can we make
some bells and whistles around it to make it
worth that much? If we can't, what can we do?
Maybe we can charge more than that. You know,
I think it's just important to be a bit flexible
rather than rigid. And you can use your hourly
rate and mark up to figure out what most people
are charging because most people are doing that.
Or if you're in retail, you can look at what
they're selling for online or wherever you want
to do it. And who's your market as well? Like
early adopters are going to pay more. It depends
whether something's available at the shops and
though as well. So, you know, work out what your
costs are, work out what your sales can be and
then how much you need to make per sale and go
from there. But I think applying the, what will
the market pay? What's the value that we have
that no one else has? You know, there's a fee
for that. How can you win a vote? Any efficiencies
that we get, do we pass those on to get more
sales or do we keep them because that's margin
for us because we're good? What if I add a radio
into my alarm clock? Might be quite a cool one
on pricing. We've got those tables and they're
very interesting. You can put in your profit
and your profit margin as a percent. And then
you can see if you decrease your prices by 10%.
How much more in sales do you need to actually
cover that loss of profit? Yep. And it's quite
interesting for a lot of businesses, they'll
do a 10 % discount and it means they have to
sell 50 % more. And for most businesses, they
don't. So they say, Oh, just get that work. I'll
do a 10 % off. It's not much, but it's actually
massive in the scheme of how much money the business
makes. Just incredible to watch. I bark on about
it all the time, but every time I see you put
one of those things up on the big screen and
try not to sound like a salesman. But this is
good, keeps our nice things. It's so good to
watch that the smallest change in your business,
it's a snowball. Exponential changes. If you're
measuring something for a building site and you're
five mil out at the start of it, 20 metres down
the line, you're three metres off. Same with
your business, except we're talking about profit.
Yeah, it's a good way to say it. Anyone who's
listened to the podcast knows how much I love
data and numbers and it makes me very excited.
actually does make me excited to watch on a modeling
day or when you have a client in and just seeing
their face light up as well. And then also conversely,
you see their face kind of go, oh yeah, I am
kind of, if I keep going down this road, I'm
going to be bankrupt in half a year. Well, what
if I just change this number over here? It's
awesome. It's just awesome. Yes. Pricing without
knowing your numbers is, um, it's a gamble. So
I just got that sheet up. Sorry, Z, to catch
you on. No, you're fine. Go ahead. I am excited.
So we just got the spreadsheet up and the last
person's information is in it, which doesn't
identify them. So we'll use it. But we used a
one point seven nine million in sales and the
cost to them was one point two million, which
was a gross profit percentage of 33 percent.
So it's probably similar to a lot of people.
But, you know, reasonably normal as an example.
So if we increase the prices by 10 percent, And
we generally use this as an argument for, oh,
I can't charge 10 % more, I'll lose too much,
the market won't pay it. What's the cost per
unit? Price per unit, in regards to 10%. Don't
know what that was, but we're just saying we
increase the prices by 10 % across the board,
or on some things more, just an average of 10%.
So the common feedback is I couldn't do that,
I'm going to lose too much work, blah, blah,
blah, I'm going to lose some clients, blah, blah,
blah, blah. If your margin's 33%. then you can
increase your prices by 10 % and you can afford
to lose 25 % of your work before it affects your
profit. One in four customers could walk away.
So for most people that are snowed under not
making enough money, not enough time in the day,
sometimes that's because you're really good at
what you do and some people will walk away. But
if your margins lower, that gets bigger and bigger
and bigger. So generally when people go, yeah,
we'll lose a few clients, we'll be no good. You
say, well, increase your price by 10%. You can
lose one or four people and still make the same
money for less costs as well. They're like, oh
yeah, we can do that tomorrow. But if they don't
lose anyone, they make 30 % more GP. So what's
that? About $150 ,000 in their example. So the
flip side is if they drop their prices by 10%.
Yeah, this is the one that gets me. They need
to... Oh, the volume's massive. to make the same
money there to do 45 % more work. It's a no brainer,
isn't it? Yeah. So I think it just goes back
to knowing your numbers, what do you need to
make and having a bit of understanding of that.
But then also just knowing where the market sits,
what the value is, where your difference is.
It's a little bit complex, but once you sort
of figure that out, then it's how do we standardise
that? So going back to what Z was saying about
you can justify a few things with higher prices
or what not, your bells and whistles, people
pay for service, they'll pay for... quality,
they'll pay for appearance, they'll pay for reputation,
they'll pay for their personal image. Convenience.
So, you know, people buy Mercedes instead of
Kias. It's not so much the car usually, it's
the reputational benefits. The COVID experience
showed that people will pay for convenience and
that has extended it past the COVID times. People
pay for faster shipping. Yeah. So it's what the
point is that we never price and it's set, but
we can adjust it with other factors which might
be relevant to different people. And that's again,
combining pricing strategies. Now we're giving
people options in addition to something else,
et cetera. But I think going back to things are
always complex, but just being open with your
pricing, is this worth it? Is someone going to
pay it? What else can they want? Reducing someone's
risk is massive. Warranties. Warranties, yeah.
Warranties stems from that. And then having,
going back to the first thing you'd said, some
confidence to actually put it on the bill. Nice
segue into a closing, that sounds like, was it?
That was off. I was actually going to chat about
discounts. No, we're not. Too early, Rog. I wasn't
actually trying to buy those. It's a good example.
We've talked with a few people recently. They're
like, oh, we couldn't charge that. Like that's
double what we're expecting to do for projects,
you know? Yep. And they're basing it on their
time and their hours and all this sort of stuff.
I'm like, well, will people pay for a deck on
their house? Like, oh, well, that was, no, I
couldn't charge more than that. So is it worth
$7 ,000? Oh yeah, deck's probably worth $7 ,000.
Are you charging full? And then they're like,
oh, I couldn't do that to them though. I feel
like I'm ripping them off. I'm like, fix pricing.
Have some confidence in your product. Yeah. Pricing
strategy, fixed pricing. Like, okay, this is
going to be upfront before they start. This price.
Are you happy with that or not? They can decide.
They can check it with the market. They can do
all that. And if they're happy to buy it, happy
days. That's another one of the things I like
about your business advice. I seem to be blowing
your tires up a lot. What have I done to you?
Next episode, I think we're... Anyway, you're
a straight shooter. the amount of times I've
gone, I'm thinking about doing this, and you've
just looked me straight in the eye and gone,
well, that's dumb. I'm not going to make any
money doing that. Stop thinking like that. Oh,
yeah, actually, I probably needed that. Thanks.
Yeah. Or conversely, it's like, why aren't you
charging more for that? That's a really awesome
service. Yeah. And see, it's the client's decision
to pay for that or not pay for that. And we,
we, we, most people filter it because of lack
of confidence or whatever they've dealt with
in the past. for a lot of people when they go
out in their own business, start dealing with
pricing that's four years old when they think
they remember it, or 10 years old. But yeah,
most of the clients I've ever had that have had
that deck scenario or similar version, four months
later, when the new quotes start coming through,
they're like, instead of making $2 ,000 a month,
they're making 20. And they're doing the same
amount of work, and the clients are happy. And
they're happy. And they're happy. Enjoying their
life again. And it's just finding that point
and having the confidence to do it. Yeah, getting
over the roadblock of guilt is usually the hardest
part about it, isn't it? The easiest way to get
over guilt is to put some value in what you offer
the world. But you're offering a service that
no one else can offer. Yeah, but you need to
be able to define that outcome before you even
start that. Because if you don't know the value,
so for example, you have someone who is... Well
experienced, a well experienced electrician,
for example, and they know all the nitty gritties
and those sort of things as opposed to an apprentice.
The apprentice is going to be cheaper, but for
a complex job, you know that you're going to
be far greater. Is your house going to burn down?
Because they didn't put something in quite right.
Maybe. Yeah, not bagging out the apprentice.
If they clean up after themselves, oh no, they're
an electrician. Sorry, sorry. Sorry to all the
sparkies out there, but you know it's true. Are
you nice to me and not electricians? What has
happened? Without them, we wouldn't have light.
Anyway, so the outcome, you need to understand
the outcome before you even start that process.
Because if you're feeling guilty, then you obviously
don't know the value that you bring to the table.
And so for example, if it's a website, You can
say, I build a website for $5 ,000 or you can
build a website that converts your visitors through
to leads, which brings you X amount of dollars,
for example. And if you get one sale for $10
,000, but I've charged you seven and a half for
my job, then I've just paid for myself. Yeah.
That's a good way to look at it. We talked about
briefly before we started this podcast between
the three of us, the podcast of Poster Syndrome,
which was the most popular in history of our
podcast. Oh, look that up. Things should get
attached to the comments, not the comments or
whatever on our actual podcast, because it's
very relevant to pricing. We're talking about
being confident and having doubt and feeling
like you're ripping people off. And it doesn't
matter how you do it. You can feel like people
are ripping you off, but it comes back down to
imposter syndrome. If you have those troubles,
listen to imposter syndrome and that should help
with lots of things. So once you understand that
pricing for a flat fee probably isn't the best
use of your time, then, I mean, my hope is that
they then turn around and they're not just exhausted
from the amount of hours that they're trying
to bill out. They're able to work four hours,
take a break, work another four hours instead
of just back to back to back to back. because
they're giving energy to that job rather than
just showing up and working the hour, for example.
When you're getting paid well, you're generally
a lot happier to be there. Yeah. And when your
client says something that's slightly anoying,
you've heard a million times before, if you're
getting paid well, you just, yeah, happy days.
When you don't make enough money and they ask
for anything, it feels like they're personally
attacking you. So it sounds like you fix your
prices is your own issue, not theirs. Oh, very
much so. 100 % relate to that when you said you're
charging not enough for websites, and that's
why you hate them. Yeah. I might lift my prices.
I hope that's changed. And you were doing it
because of a public service. Yeah. You were like,
oh, people are getting ripped off of websites.
Yeah, yeah. Don't do it cheap and affordably.
Turns out they weren't getting ripped off. It's
what you got to charge to enjoy your life. Yeah.
And you were helping everyone. You could be angry
as doing it because no one appreciated it. But
going to that is sometimes if you don't bill
people, they don't think it's good. So going
to talking about a deck before. Yep. Three grand
decks, no one here is as good as a seven grand
deck. We all know that. No, a hundred percent.
Yeah. So now you're charging three grand for
a deck that's the same as a seven grand deck.
You're just taking away the bragging rights for
your client. Now all I want to do is watch the
New Zealand deck. They must have sold a heap.
Google it. Yep. So let's say someone's come around
to understanding the value based pricing. The
combination of everything. Well, yes, combination
and understood what it is that they bring to
the table. that probably the next barrier will
be the pushback of some clients, which we have
talked about if you lose one in four clients.
It can be good. Could be a good thing. Depends
on your numbers. That's the general example we
used before, by the way. But yes, do expect that
probably some clients will push back and they
will just ask, why don't you just offer a price?
But you need to show them what that result is
worth. That's a pretty A good rule of thumb is
easier to lower your price than raise your price.
So if you are just starting out as a new business
and you think you're not charging enough before
you even start publicizing your prices at an
extra 20%, you can always come down. It's very
difficult to lift unless there's a justifiable
reason. You'd generally be surprised. Someone
was brave recently. They went and bought a coffee
van and set prices, et cetera. Charge market
rate. Oh, no, because we won't have this and
this. We don't have to. I don't write this. Yeah,
do it. And then they've been wildly successful.
The markup on coffee is outstanding. And he was,
he didn't want to rip people off all those common
things. And we did a budget for him. So I said,
well, here's your price, what you want to do.
And here's the price I'm suggesting. And it was
like double the net profit. Yeah. And you know,
we'll do that. You can always discount it if
you want to. Yeah. But you can never get more
money. And having the yearly discount or a seasonal
discount every now and then, when you are pricing
at a point which gives you enough profit, that
can be a strategy as well when the market turns.
Going back to what Zee said, because we've just
cut her off and changed topic. But yeah, the
pushback when you do change your prices. It's
important to understand that if people won't
pay it and you need them to pay it, there's a
lot of service there. If they won't pay it and
other people will. Then losing clients to get
other clients freeing you up for better ones.
That's a good thing. Yeah, they're not your client.
If you've got clients that don't want to pay
you, then they're probably wasting your time
and upset, not paying you on time or whatever.
Where you've got clients who really want to deal
with you and very happy for you, that will be
happy to pay it. So sometimes losing clients
frees up space for better clients. But at the
end of the day, you can't have a model where
you're not making money because you're going
to be unhappy and that's no good. Who's your
best client? What's that avatar look like? It's
a podcast there somewhere. Pretty sure we've
done something like that. But yeah, your job's
not to convince them, it's just to clarify your
value so that the price actually makes sense.
Because you do deserve to be paid for the value
that you bring, not just the time you spend.
I do think that a lot of that does come from
what is ingrained in you. As a child, like you
spend the eight hours in the office, you get
paid for those eight hours, you get paid for
your 40 hour a week, you go home, that's it.
Makes sense to everyone. Yeah. Yeah. And that's
the way we've always done it. It is the way we've
always done it. Yeah. But we're all so ingrained
together in the supermarket and buy a bill for
$5 or $6 or whatever the price is at the time.
Yeah. So all we do understand if an exotic house
is worth this, we can't just say, oh, it was
built 10 years ago for 20 hours, you know, like
it doesn't work like that. Yep. Quick question.
Do you see a industry or a product or a service
that would benefit more from an hourly rate billing
structure? Yeah, I think we've got a large amount
of labor and reasonable controls in place. It's
nice and transparent for everyone. If everyone's
happy with that, it's quite good. A labour hire
is a very obvious one because you're selling
an hour for an hour, you know, but things are
always complex. So when we say value price and
it's probably more ethical than an hourly rate,
but sometimes an hourly rate probably is more
ethical. Hey, we don't know how long that's got
to take. It could be this, it could be that.
Maybe you've got long term relationships with
customers, you're happy with your hourly rate
and they're happy with what you're doing. You
know, it's easy for everyone. I've done that
in the past with custom web billers. I'm like,
well, here's the price. Here's a contract price,
but I think you might. We're not sure. Yeah,
you might get better value from an hourly rate
because I think it's going to take roughly this
long. But it could go either way. Yeah. So it's
not that. But I think it's just it's just using
them all in combination. And as I mentioned before,
it's like sometimes you probably don't want flat
rates. Maybe you want to look at each show, but
sometimes maybe flat rates is a good part of
the mix. You know, you win some, you lose some.
So it's just whatever works. Have a conversation.
But an hourly rate makes sense when you've got
a bit of a scale. You've got People that can't
have a bit of a logical decision, can't make
one, sorry. But you need to look at that with
some other strategies at the same time because
any strategy just by itself might not be too
effective aside from market rate, which is it's
fine as long as people wouldn't pay it. So I
think what we're trying to say is that all of
these pricing models are not necessarily wrong,
can be used. differently for the benefit of your
business. That's the art. Yes. Just need to know
how to do it and where your numbers are. Definitely
needs to know your numbers. I know a guy. But
probably best to reflect on that at the end of
this podcast or whenever, because we do think
that people should respect your skill, not necessarily
just your availability. That's not really fair
on you. And if you are the person with the skill
and expertise running your business, then then
you own that. Price accordingly. Yeah, exactly.
So just make sure that you're not affordable
to everyone because that's not going to be...
Don't be affordable to everyone, but it'd be
great value to your good clients. Yeah, exactly.
Yeah. Be invaluable to the right people. That's
the one. All right. So we'll wrap it up there.
If you would like some more information, just
shoot us a message because we do have some resources
that you can use to price. effectively for your
business. And if you need help, just give us
a call, but we'll wrap up the podcast there.
Thanks everyone. Bye. Bye.