On this Thrivetime Show episode, Clay Clark answers the questions: When Should You Raise Your Prices? How Do You Create a Culture of Discipline? How Can a Business Owner Achieve Time Freedom?
Business Coach Questions
When should you raise your prices?
The perfect price point is where the customer complains about the price but still buys.
Thrive nation. Welcome back. It’s the thrive time show on your radio and podcast downloads. On today’s show, we’re talking about whatever business conferences team member Sean wants to talk about because Sean is a business conferences coach. He’s in the trenches much more than I am. He works with real business owners on a daily basis. Well, I personally only work with partners, so just make sure you get this. If you want to partner with me, if you say I want to grow my business and you’re willing to give up five percent of your gross revenue to do it above where you’re stuck. Let me just give you my. This is my pitch for the spiel. If you have a business that stuck and you say, I’m stuck at 500,000 a year and you want to grow it to a million, if you team up with me, this is how it works. You pay a flat fee to me to coach your business. That’s fine. And that’s a new fixed expense for you.
We’ll call it $1,500 a month ish, but I get five percent of the growth above where you’re stuck because every time I work with a business that grows, typically we can double a business and about a year and uh, that’s how it works. And I would be crazy to do that deal if I didn’t actually double businesses because I wouldn’t. Five percent of zero isn’t that much. So I only work with partners. So I work with guys that I’ve had longterm relationships with and that’s, I mean, I’ve coached the same businesses for nine years, seven years, six years. I mean Dr Chad Edwards with revolution health. I’ve worked at the same guy for like six years. I mean, I worked at the same people for years and so I don’t really work with a short term coaching relationships. I don’t do that. I’m more of longterm partner and that’s what I do now. Shawn works with clients that need help and they reach out for help growing their company and they don’t have a partnership yet. They just said I want Sean for free to help me grow my company. And so I, my job is to coach the coaches and so shawn can ask me any question, any question you have this week, any question that’s happened from a client, any business question, any life question that you want to ask you. This is your opportunity, my friend. You got, what do you want to ask?
All right. So, uh, I got a business conferences question from start here. You have a section in there, section 23, 26 point three, the 12 telltale signs that your pricing is too low and number 12 is that your brand is significantly better than when you started, yet you have not raised your prices. So the question is, um, you know, doing what we do with clients initially, we build them a completely google friendly
website. We help them to get reviews and testimonials. So like, just from doing that, can we expect to be able to raise our prices? You can only raise your prices until the customer complains but still pays. So I’m Paul Graham is the author of many books. He’s also the guy who helped launch airbnb and dropbox dropbox and he’s a guy who really knows a lot about a business. So again, air, Airbnb, dropbox, these are all companies that he started and I’ll pull up the notable quotable on the big screen and chuck can put it on the show notes, but I’ll pull it up for you. He says you’ve found market price when buyers complain but still pay. So that’s it. I, I would say I think a business should operate at about a 20 percent profit margin. Twenty to 25 percent. I think it’s unethical. Personally.
That’s my take or not good or I’m not gonna be mad at you if you make a higher margin than that, but I don’t think you’d make a 20 percent profit margin. People feel like it’s a fair deal and they’ll come back and bring friends. People that I see who raised their prices so high that everyone’s complaining. I don’t think that’s sustainable. I think it. It’s, it’s so. I would just encourage you to raise your price I think, but I see a lot of. Most most business owners are making like a five percent profit margin, like they’re barely making any money at all. I’d say nine and a 10 business owners are barely making any money at all. I think of so many great people that I know have met. They’re operating, they’re working all the time and they’re not making much profit at all and that’s a problem.
Friday 95 percent of people, but there are five percent of people out there that are charging too much because they think they’re awesome and this is. This is how you can tell if this is your problem. It’s where you are trying to market yourself like the world’s the best builder in your town, but you can’t call your leads. Are you trying to market yourself like the world’s best builder, but you can’t show up to work on time. You try to market yourself with the world’s best builder, but you don’t have weekly team meetings. You try to market yourself with the world’s best builder, but you don’t have an org chart. Well, you’re not the world’s best builder if you don’t have those things. So true. Therefore, you can’t charge freaking crazy premium prices unless you are a. there’s more people who want you, then you can serve it so where there’s more people chasing you, then what you can serve.
That’s when you can really raise prices a lot. That’s how you would do that. I mean, that’s like. That’s very helpful. A Porsche only produces a certain number of vehicles every year. There’s more people that want a porsche than force makes more people want a porsche than a porsche is willing to produce. The proportion actually has less supply than the demand and therefore their prices can be premium and their precision made and that’s why Porsche can charge for the charges. If Porsche made more cars than people wanted, then they could. They could be a surplus, right? You have to lower price it. Does that make sense? Yeah. Any other questions that you have? My friend?
Okay, so I’m kind of in that vein. You have a quote from Isa door sharp, the founder of the four seasons resorts says, great companies first build a culture of discipline and create a business that fits squarely in the intersection of three circles, Socos what they can be best in the world at a deep understanding of their economic engine and the core values that they hold with the passion. So could you share what is the door means by specifically a deep understanding of their economic engine? Maybe give a few examples.
Okay. I recently had a conversation that ended a friendship about four years ago and I’ll just tell how it went. The Guy said, uh, I said something like, Hey, we’re having a casual conversation. And the guy says, uh, what, what, why, why are you, why are we building thrive? What’s the point? And I said, I want to mentor millions and build the world’s best business school. And he said to me, well, we can’t be the world’s best business conferences school unless we have quizzes and some kind of grading system. And I said if we had quizzes and grading systems, we wouldn’t be a good business school because that’s raw. That’s what, that’s what’s wrong with business school is it’s quizzes and tests. It’s not a practical application. Our students are actually implementing what we’re teaching on a daily basis. And if we ever had people that were taking time out of life to attend our school and take quizzes and tests, that would be stupid.
So I will build the world’s best business school. And because I had been self employed since the age of 16 and you have never started a business shut up because he kept bringing it up in meetings all the time. Like every meeting like, well we can’t be the world’s best business school. We don’t have quizzes. I said, shut up. We have like a huge video library and none of our entrepreneurs ever would take those frequent quizzes. In fact, they were annoyed by them because why the crap would you want to get a certification? Anybody who’s a real entrepreneur doesn’t give a crap about certifications. I’m the real deal. I don’t need a freaking certification. Come to my businesses show up. I don’t need a freaking certification. That’s so I’ll just say is the culture of discipline is you. You know what you’re about rebuilding. We’re mentoring millions and we’re building the world’s best business school.
That’s why I do thrive to mentor millions and build the world’s best business conferences. Those are your core values. If you hold with deep compassion and anybody who’s not committed to that, get off, get off my field, you know, and so the discipline comes from, we better shoot good videos, great videos because we need to be the world’s best business school. We’d better have great production. Every single podcast that chip and I do, I personally go in there and audit those things. Chuck works hard to audit these things, to edit them, to make them sound good. We think deeply about the transitions and the segways. We do everything we can possibly do to make it better. We brought in Colton Dixon, a, a top 40 artists Supa staff to come in and sing our intros. I mean, everything we do is designed to be excellent and the discipline is holding yourself accountable to being excellent, not just mailing it in.
Every show needs to sound like it. It is like my last show. I need to treat every single show like it’s the luck of the last and only show I will ever do again. I need to view everyday as though if I die tomorrow and the show I just did is what I get to show God. You’re supposed to work as unto the Lord. So if I get up to heaven and God says that last show and listened to you kinda mailed a den, but that’s a stupid show. That’s a dumb shuts. Disrespectful. I mean every day is a gift. The air in my lungs is a gift and everyday I have on this planet is a gift from God and I’m not going to waste it. I’m not going to waste my talents and wasted my day. Um, and so if I’m going to do a show, I’m going to make it freaking awesome show.
And if it’s not, you say, well, what by what? By what measure do you determine whether it’s awesome. Okay, it’s the best that I can do. I do my best and I forget the rest, but I’m never going to give it 80 percent or you never got to mail it in. That’s why the show for me is a spiritual thing and that’s why I cannot stand anybody who comes into the man cave and interrupts me because this show is my heart song. It is my anthem, it is my chorus. It is all I do. And my goal is to help you, Mr Thriver to have the best life possible. And I really do believe it’s a, my spiritual calling to help you create time freedom and financial freedom. It is not a job for me. This is what I do. Sean, do you have other question?
Um, yeah. So I’ve got a new client that we’re bringing on board and this guy has been in business for 35 years, 35 years, and he’s probably an into habits, both good and bad habits. Whenever you’ve been doing for 35 years, you probably are doing some things really well and some things probably really not will. So that’s, that’s probably in a hypnotic rhythm called a habit. So that’s probably where we’re at. So anybody out there listening, if you’ve been in business for more than 20 years, you probably are used to doing things because that’s the way you’ve always done them. You keep doing it one way because they’ve always done it that way. So what, what’s your, what’s your question? What would you say to this business owner who says he can only meet at 8:00 PM night? Well, I mean, um, one is, I would say, one that is probably true based upon your current reality.
So what you need to do is we need to figure out what we’re going to say no to. And we need to not be a charlatan. And assume that you can make epic life changes in 10 minutes simply because you hear it, a part of podcast, we’re going to have to ask ourselves, what do I need to get rid of all my schedule to free up time to work on my business and not just in it, because if you don’t ever work on your business, your business is like a coffin that you are stuck in and you will die. You will die at your desk always working because there’s always one more thing to do. If you’re a reactive entrepreneur and you’re somebody who spend your entire day reacting to the business needs, you will much like a nuclear reactor. If not properly cooled, it will blow up.
It’ll implode meltdown, it will melt down and you will have a meltdown and then you will never have a breakthrough until you have a breakdown, usually called a stroke or heart attack or some life issues. So you need to take a time out and go, when can I? What can I take out of my schedule? And it’s usually, these are the things that I see entrepreneurs wasting their time on. So these are things I see and I’ll just give you the big three. Okay. One, you probably have a family member who works for you. Who is it? Just a freaking disaster or a friend or somebody who just does a terrible employee and you spend all your time coaching them and mentoring them up and hoping that you can change their ways. You probably most small business owners hire a lot of family. You probably just need to fire that person, eh?
One business owner. I’ve worked with a. This is two months ago, Guy I worked with, he actually had to fire his own sister and I said, here’s how. Here’s how it’s going to go down. What do you pay your sister for a week? He says, $600 a week. I said, okay, here’s what we’re gonna do. We’re gonna. Go ahead and pay her $600 a week forever. Tell her you’re still going to get $600 a week forever. You just can’t come here. True Story. And he says, forever. I said, well, these teller, like for the next year, here’s what’s crazy, dude. He pays her $600 a week to not come to work and he’s found out he’s more profitable. Whoa, because she’s such a disaster. Every time the phone would ring, I’m not kidding. She was so terrible on the phones. Every time the phone would ring, we started call recording and she fought us about call recording guitars and we listened to her calls.
She would literally not. She would steer people away from the business with her attitude, and so by paying her 600 hours a week to not work, he’s actually more profitable. That’s that. That’s a big time waster. He was a money repellent at. True. Yep. Second area where people are wasting their time is on their smartphones. Smartphones make people dumb. So this guy, I’m not getting this, this particular person. This is what every client’s the same thing. They’re spending all their time on social media, liking things, trying to be more relevant on Pinterest, trying to tweet with people and build a youtube following saying stupid stuff. Like, look, I’ve got 17 new followers. I mean really? Okay, great. So they’re spending all their time on social media or networking, going to all these stupid tips groups. Just just, Hey, do you have a referral for me?
Let me tell you what, if I went to a breakfast meeting, a tips group, you would have to give me 25 buyers to make it worth my 15 minutes at your breakfast because I’d have to drive there. Drive home, meet everybody. I mean, you better. This is it. This is how a tips group should work. If you’re going to go to a tips group, this is how to better work. Alright everybody. My name’s Karen. I am a Roofer and I have a 47 referrals for you, Charles. Hi, my name is Charles. I’m an orthodontist and I have 87 referrals for you, Mitch. I mean it and otherwise it’s a waste of time. I don’t want to stand for the national anthem and read your stupid pledge and recite your mission statement. And about last month we covered this and next month Karen’s bringing bagels. I mean, we really need to revitalize mainstreet and know it’s gonna be a.
it’s going to be a great way for us to give back and we’re doing a scholarship for $500 to johnny. If anybody would like to contribute, screw that. Just write a check to johnny for $500 and go back to work. So I’m saying, but we have a business though. You have business conferences leads coming in all the time. Once you’re top in google. So again, wasting time networking and on social media, that’s just a huge waste. Having an idiot employee is another huge waste. Third biggest waste of time is not having a performance because if you don’t know how much money you’re making, you’re not making. Let me explain this to the thrivers out there. It costs me $96,000 a year to feed my family. Okay. Ninety 6,000. What? Yep. I have five kids, five kids to feed the family, called the family, send him to school.
Just that’s what it costs for my life. Okay. Okay. That income is taken care of with one business. Right? And so I think right now I’d take a side of 144,000 a year. Why? Because anytime you take income above a certain level, I’m basically paying 50 percent of my income and taxes 50. I don’t need any more things. I go to hobby lobby and I buy things that are like $7. I mean I buy these like ridiculous, like porcelain elephants. I’m buying and I was like $8 or if I am a frog with a cigar in his mouth. Yeah. Are All by like a frame. The tap off. I’ll buy like a half off frame and hobby lobby. That’s my real crazy expense. You know what I mean? I mean I, I might get guacamole with my wife on a Wednesday, so I’m saying like I’m not going out there like buying porsches and lamborghinis and bigger houses.
I don’t, I don’t do that. So all I’m saying is that you, if you have a performer or a budget, you know where you’re going so you don’t drift because if you’re not careful, you end up buying a bigger house and a bigger car because that’s what society says to do bigger bill. And they got bigger bills and you got to work more and you spend your whole life chasing a dream only to find at the end of life that the dream you’ve been chasing is called your family and they’re at your house. So you’ve traveled all over the world trying to networking, trying to find your, your people, your network, your vision, your value, your mission, your purpose, and then when you get sick and you get to the end of life, you realize I should probably go back home and spend time with my family that I haven’t seen my whole life because I’ve spent my entire time, my entire time tracings chasing some ridiculous rainbow.
So Stop Rainbow Chasing. And that’s, those are my big three. No regrets. Okay. So you said a pro forma. This guy is a, he’s a builder, Brian Builder. He has been for 35 years, so he’s probably got a very specific way that he’s estimating, at least this is true with other builders that we’ve started working with. So working, uh, well I haven’t talked to him in depth about it, I guess. So if it is working, do it. Yeah. If it’s not working, come out to our in person workshop and Aaron antice will be there. Aaron antice is. I’m the head of marketing for Shaw homes, which is the largest home builder in Oklahoma and he can show you how to do it. He sold over $800,000,000 personally. Yeah. They sell about a million dollars of homes every day. Yeah. There’s a lot of moving pieces in home building. So this building, a pro forma with home building is going to be a little different than cookies, you know, it’s gonna have a lot of different variables.
Should probably take you 25 hours to do it, to make your performer for a home builder and you just sit down and you just do it. You gotta to make a list of all your fixed expenses in one column. Then you make a list of all your variable expenses and you have to put in the cost of raw materials and you’ve worked in concrete. The costs of materials changes dramatically based upon agreements we have with China. Right. Who knows, who knows? You know, so like, I mean the cost of steel might go up or down or would goes operator, I mean example, plywood went way up recently and that greatly impacted all the people I work with and the productive clients just went into the Performa, updated it and raising the price. So I want to ask, I want to get your take on this claim, on the phone up on his question.
There’s a difference for this guy in his home building company between his pro forma and an estimate, right? So yes, he needs to keep a database of all these materials and keep those updated. But to operate his business he needs a proforma of his own fixed expenses is variable costs and all that kind of stuff. And that should impact your, your estimate. So once you have a very detailed performer like Shawn Homes, and I’m not exaggerating, show homes can meet with somebody today. They can do what they, um, it’s Kinda like a discovery day, but you sit down as a customer and you choose, you know, do you want would scraped wood floors, do you want tile, do you want marble? And Granite countertops, right? Or do you want crown molding and you just, you tell them what you want and you sit down and they sit down like in a movie theater and they let you choose all the different options and they show you examples of it.
It’s called the Jonathan Kelly method. So once you go through the, the home price out process, you then they say, well hey, well we’ll get you a quote for that, you know, tomorrow. And like in like literally it’s like three hours or two hours. That’s an exaggeration. Probably going an hour. They can just punch in all the variables and hit enter and then it just uses a basic spreadsheet. They’re able to quote a person right down to the dollar, what they’re kind of, what they’re going to charge them to build like a $360,000 house. Yeah. But if you don’t have a performer in place, it will take you like 50 hours to do a quote and then you’ll be hesitant to give anyone a quote at all unless they sign a contract with you and no one will sign a contract with you unless they have a quote first.
So you ended up this. But for business conferences client Shaw Homes, no big deal for them to give you a quote because it takes them like an hour. Yeah, yeah. I’ve heard you saying that. Uh, Aaron Ansys, his brother, he works for the company as well. He and Joe does all the designs. He actually does the home designs. The blueprints, the, he’s the architect? Yeah. None of the home builders that I work with have somebody who’s doing what Joe does, where they’re keeping up to date with what everything is costing so they can keep their pro forma uptodate, which is why I would recommend they would tap into the of Aaron antice and his, as he calls it, the builders training academy, but he literally at our workshops, teaches the stuff and you can come to our next in person, thrive time, show workshop, sit next to him and talk to them during lunch. Tap Him on the shoulder and he’ll show you how to do it. I mean, that’s. That’s what we’re all about. We’re all about showing you in, but it’s not something I could get into the detail of on a 10 minute podcast because it requires you sitting down with somebody and literally taking a, you know, not exactly. I’m not exaggerating, maybe 25 hours to do this and then once you do it, then you’ve got it forever.
Then maintain it. That’s the other thing I see people fall off as they get it all built and they spent all this time investing into the system and then they never keep it up to date, so at that time was worthless, so it’s just maintaining. I’m going to go maintain my marriage. Yay. Hitting on my wife and harassing my kids. And so without any further ado, let’s end this show with a three, two, and one of the. Boom. Here we go, chuck. Chuck, how about this shit? When I do three, two, one, can you do boom. In a weird way? Yeah, man. Just kind of thinking about it. Here we go. Three, two, one.