SUPER MOVE #31 from the business coach – Invest more in high-profit clients, services, products, and people and cut low-profit clients, services, products, and people
You will soon realize that you can always make more money, but you can’t make more time. Because of this, after you know your numbers, you must objectively look at your clients, services, products, and people and ask yourself:
1 – What do you need to invest more time and money in?
2 – What is it that you need to invest less time and money in?
To help make this process easier, we have created an incredible interactive tool to guide you through the process at www.Thrive15.com/determining-low-profit-client-services
“Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.”
(Self-made billionaire and philanthropists often referred to as the best investor in the world)
SUPER MOVE #32 – Make brand-focused, shrewd decisions when it comes to pricing and purchasing
According to Webster and their team of definition-knowing people, the word “shrewd” means “having or showing an ability to understand things and to make good judgments: mentally sharp or clever” (Merriam-Webster Online Dictionary, s.v. “shrewd”). When I say you need to make shrewd decisions when it comes to pricing and purchasing, I mean that you really need to understand your goals, ideal and likely buyers, your brand, and your ideal profit margins and you need to act with this knowledge in mind. For instance, don’t get all nostalgic and emotional when setting your prices and over-the-top loyal when buying a $500,000 building. Do things that will benefit the brand. Get the facts and then act.
“It doesn’t matter which side of the fence you get off on sometimes. What matters most is getting off. You cannot make progress without making decisions.”
(Bestselling author and renowned motivational speaker)
To help you make better business decisions by gathering the facts and then acting, we have put together a decision-making worksheet for you at: www.Thrive15.com/learn-how-to-make-tough-business-decisions-worksheet
26.2 – Reevaluate Your Pricing Model
As a general rule, startup founders and small business owners who are struggling to gain initial business must sell their products at any price they possibly can. This is what you have to do to close some deals and pay the bills before you have to begin eating old shoes for dinner like the people on Christopher Columbus’ ship who ran out of food. Generally over time, the business will raise prices to keep up with inflation (the devaluation of our fiat and paper currency due to government’s inability to stick within a budget and ability to print money whenever the heck they want). However, in 9 out of 10 cases, as a business coach, I have discovered that most business owners have never truly thought about whether they should completely rework their pricing model to create massively more profits for themselves and their team.
To help you determine what price you should be charging, we have put together an incredible pricing worksheet for you that is available at: www.Thrive15.com/how-to-price-your-products-and-services-properly
To help you begin to really think about your pricing in a new and potentially game-changing way, I put together the following list of questions you can ask yourself:
• Why do you charge what you charge?
• What do your closest competitors charge for similar products and services?
• What would happen to your business if you radically raised your prices?
• How much does the problem that your products and services solve currently cost your ideal and likely customers?
• How could you use industry facts to immediately make your pricing seem more reasonable and more appealing?
• What could you do to increase the emotional value of your product and thus, the price you could charge?
• What is a key endorsement that you could secure to dramatically increase the perceived value of your product?
• How can you use testimonials to dramatically increase the price people are willing to pay for your products and services?
• How could you combine another service or another product with your existing services and products to offer a more valuable, higher priced solution?
My friend, as a business coach, I really want you to think long and hard about how you can increase your prices to make more profit from each customer in a way that still creates a win-win relationship between you and the customer. It’s very easy to fall prey to a pricing war, trying to land customers with rock bottom, no-brainer pricing. However, over time as your company gains momentum and customers, you don’t want to keep your prices artificially low just because that is what you’ve always done.
26.3 – 12 Tell-Tale Signs that Your Pricing Is Too Low
1. The demand for your product exceeds your ability to produce it (you can’t keep up).
2. It takes your business more than three weeks per month to break even, yet you can’t produce any more products or services because the demand for your services and products is already too high.
3. Your prices are much lower than everyone else’s in your market and you have no specific reason for keeping your prices low.
4. By solving a specific problem, your product or service is saving your customer 11 times or more than what they are paying you.
5. You are not making over a 30% gross profit margin on each transaction (if you are in oil and gas, commodities, and certain industries, you obviously can’t operate at a 30% profit margin, but in most industries, I would recommend that you aim for a 30% profit margin, minimum).
6. You keep finding yourself working with more and more non-ideal and non-likely buyers. (Hint: You want to work with fewer non-ideal and non-likely buyers and more ideal and likely buyers.)
7. You haven’t raised your prices this year.
8. You are offering 10x more value than your competition.
9. You have done the math and have determined that it is impossible for you to ever achieve both financial and time freedom at your current prices.
10. The COGS (cost of goods sold) has gone up, but your prices have not.
11. You charge by the hour and thus the more efficient you get, the less money you make.
12. Your branding is significantly better than when you started; yet you have not raised your prices.
13. Your public relations efforts have helped you secure some third-party media features and a few credibility-building media appearances, and you have not raised your prices.
26.4 – Marinate on the Possibility of Changing How You Charge
As a business coach, I have successfully worked with many service companies to help them move from a one-time charge-based business model to an ongoing revenue stream model. Is this possible for your business? As a business coach, I’ve helped a men’s haircut business that was struggling with inconsistent revenue and the financial and staffing problems this creates, a music school with the same problem, a winery with the same problem, a basketball facility with the same problem, a hockey venue with the same problem, a medical facility with the same problem, a spa with the same problem, a PR firm with the same problem, a graphic designer with the same problem, a website development company with the same problem, a search engine optimization company with the same problem, a fitness company with the same problem, a gift giving product company with the same problem, an attorney with the same problem. In each case, switching their pricing and business model from a one-time charge to a membership model helped to bring consistency to their income and more value to their customers. The best business models allow your business to develop life-long relationships with customers who truly appreciate the value that you add to their lives and the problems that you help them solve.