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SUMMARY
- Are you able to take time off whenever you want to? If you wanted to step away from your business for a day to spend some time with your family or recharge your batteries, could you?
- If your business is all over the place, the answer is not to shut everything down or try new marketing methods. You don’t even need to master productivity in order to run a successful business and enjoy a wonderful lifestyle.
- Price is actually what determines and dictates pretty much everything in your business. It doesn’t just determine profit; it determines how many hours you’re going to work per week, what kind of clients you attract, and ultimately, how happy you are. Price determines the kind of business you run.
- Your business is whatever you make it. If you start a business and you don’t like it, it’s because it’s something that you created. It’s not the same as an employee situation where you’re just a cog in someone else’s machine.
- If you have a product or service that’s making you a little crazy, getting rid of it is not the solution. Neither are completely revamping it or figuring out a 57-step marketing funnel. These are all self-sabotaging techniques in business, which a lot of people use as a form of procrastination to avoid the things they fear.
- What you can do instead is adjust your pricing model—price is the knob in your business that you can turn to make significant changes in your favor.
- In Mike Shreeve’s own example, it takes the same number of phone calls and the same number of units that need to be sold per month in order for him to make $10,000 in profit for a product priced at $3,200, as it does for him to make $60,000 in profit for that same product priced at $5,000.
- Many freelancers have a fear of raising their prices. They’re afraid that if they do, their clients are going to leave them, they won’t be able to deliver, or they have to do more work. In reality, higher prices mean less work, and less work means you’re probably going to do a better job.
- You should be afraid of not raising your prices, because when you don’t raise your prices, you run the risk of burnout. If your products or services are priced incorrectly, then you’re running a business that’s not sustainable, both financially and personally.
- The way to increase your profits is not by going out and hustling more, because the more you hustle, the harder it is to maintain quality. And poor quality leads to unsatisfied customers. The answer to all this stress and craziness is to raise your prices.
- How you raise your prices and what you charge has more to do with what’s inside your head and the beliefs you have around your product than how you market it or who your audience is.
- Higher prices allow you to build a sustainable business that lets you be calm, focused, and deliver a better product than anyone else.
- Recommended readings: Profit First by Mike Michalowicz, Mastery by Robert Greene, and The Talent Code by Daniel Coyle.
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INSPIRATIONAL QUOTES
FULL TRANSCRIPT: The Real Reason To Raise Your Prices
I wanted to get a little bit of content out to you today before I spend the rest of the day with my kid. Today, he’s got a half day, and whenever my kids have time off, I just wipe my schedule clean and spend the day with them.
One of the ways that I’m able to do that, and the way that I want to share with you an important strategy and tactic is, I have built into my business enough profitable margin to take large amounts of time off, so I work with a lot of people, both in my freelancing career and my No Pants Project students where the way that they price their services is actually destroying the lifestyle aspect of their business, so we think that in order to have a great lifestyle in a business, you need to somehow have the pinnacle of productivity.
You need to somehow be the person who can get 900 things done in two minutes flat, and that’s the only way that you can be happy and successful.
Well, there’s this concept that we teach inside of The No Pants Project core program, and for those of you who are interested in ever joining that program, just shoot us an email at help@thenopantsproject.com. We can get you set up in there.
In that program, we show this cycle where price actually determines and dictates pretty much everything in your business.
So price is the switch that determines:
- how happy you are,
- determines how many hours you’re going to work per week,
- determines what kind of clients you attract,
- determines all of those things.
It doesn’t just determine profit, okay?
What I want to share with you here today is, I want to show you something that I was doing last night for one of my businesses. I want to illustrate. I want to demonstrate. I want to show you how powerful this concept of price adjustment can be to determine what kind of a business you run, because the crazy thing about running a business is that it is whatever you make it.
Nobody can start a business and then complain, “My business sucks. It’s somebody else’s fault.” It’s not. This isn’t an employee situation where you plug yourself into somebody else’s thing. It’s easy for you if you’re an employee to go to a company and say, “Wow, I really don’t like this company.”
That’s easy.
It totally makes sense because you’re just a cog in their machine, but when you create your own business, if you don’t like it, it’s because it’s a business that you design, and so I want to show you and give you some power here to readjust and see where the nobs are in your business that can make the biggest adjustments in your favor for whatever it is that you want.
Now, the first thing I want everyone to do is to go get this book. Let me see if I can see myself here, if you guys can see this book right here. Go see this book right here. It’s called Profit First. It’s by Mike, and I can never say his last name. Mike M., how about that? You guys can see it, Mike M., Profit First, amazing book. He will teach you and show you how to structure on an accounting level, how to deal with money so that your business … If you’re not worried about, “Am I going to be able to pay my bills? Am I going to be able to,” et cetera, et cetera.
Well, what I want to show you right now is pricing strategy, so this is a good book for dealing with your money. I want to talk about how to get that money in the best way to maximize even what Mike’s saying in his book.
Let’s take a look at this spreadsheet. This spreadsheet is, I am planning in 2019 to launch some new products and adjust one of our product pricing models because for the past year, the pricing model has made me a little crazy, right?
I think it’s important to understand here, I was selling something. It was making me a little crazy, so I’m not going to take that thing and destroy it. I’m not going to take that thing and figure out what’s a 57-step funnel that will somehow make me happy. I’m not going to take that thing and completely revamp it and restructure it and start over.
Those are all self-sabotaging techniques in business, and a lot of people use self-sabotage as a form of procrastination to avoid the thing that they fear.
The answer to this thing that I’ve been selling that I really want to be a peaceful, calm, something that serves my people very, very well, who purchase it that get the maximum results and all these things. The nob that we turn, the mechanism, the lever that we pull on the business is the price of this thing.
The price is what will determine how peaceful it is for me to do this thing.
Okay, so what I was doing last night is, I was running some very basic financial models, which for me is an ugly-looking spreadsheet like this, and those of you who are super into spreadsheets, you’re going to be like, “Oh my gosh. What is he doing,” but a very, very basic spreadsheet.
I have my base cost of every month, this is what it costs to run this particular product, so in this case, it’s about $46, 000. That’s not including ad spend. That’s not including anything else, so this is for one of my businesses. I’m not going to say which business it is, and I’m not going to say what the product is or anything like that. I will try to be transparent, but there is a limit to where I can be transparent. $46, 000 to run this specific thing, okay? I have variable costs.
The variable cost is basically how much it costs to sell the thing with ads, and then, in this case, the model in which we sell this particular thing is if you have to get on a phone.
That means we have commission sales people. It’s about $750. it’s about 15% commission per sale, okay? Those are variable costs, base cost. Let’s say that per sale, we get $3, 250, and that’s because we’re charging $5, 000.
We’ll work through this here in a second. Bare with me if you’re not a numbers person. I promise, once I get through all these numbers and I show you the power behind this, it’s the only number that actually matters. I’ll show you what that is.
Desired monthly profit, total revenue needed. Here’s where we start to get into the important numbers. I want to know how many units of this thing do I need to sell per month to make my desired monthly profit on this particular piece of my business? Not even in the whole business, just this one product, this one service, this one offering in my business. How much per month profit do I want to experience?
As you can see, I’ve set that my desired monthly profit is this, and I’ve done my spreadsheet so that it helps me to figure out how many total units I need to sell based off of the profit that I am anticipating between variable costs and then base cost. Don’t worry about all of this. I just want to explain the numbers because I want to show you one very, very simple number.
Okay, so then, we got our ad spend and total ad spend per day and total. If you’re thinking about going into business, my friends, do these numbers. Run these numbers, and I’ll show you specifically what I mean here.
What I’ve done is, I’ve ran the same model for nine different parameters. The first is, what if I only sell this thing for $3, 200, and I want $10, 000 profit? What if I only want to sell this thing for $4, 000, and I want $10, 000 of profit? What if I want to sell this thing for $5, 000, and then, I only want $10, 000 for profit, and then the same for what if I want 30, 000, and I’m selling it fro 32, four and five, and what if I want $60, 000 in profit, 32, four and five?
I want to show you some very, very important numbers on why raising your price will make you so happy, okay, because I work with a lot of people, and even the people who are either multimillionaires, they have these big businesses, you would think that they’re over the fear of raising their price.
I’m here to tell you, the people who are in the No Pants Project, a lot of them are very … They’re starting their business for the first time, and they have the same exact fears in both camps.
Almost everyone I talk to is afraid of raising their price. They’re afraid that if they raise their price, the clients are going to leave them. They’re afraid that they aren’t able to deliver at a higher price, that somehow, higher price equals more work.
Hopefully, I’ll be able to illustrate to you that actually, higher price means less work here in a second, which by less work, meaning, you’re probably going to do a better job, the higher price that you charge, or they fear that, “What happens if I take on this big project, and they don’t like it? Are they going to be exponentially more angry at me if they have a higher price?”
There’s a lot of fear around that, but I want to show you that, that fear is misplaced, that when people come to me and they say, “Mike, I’m really … I’m afraid of raising my price to this.”
My response to them is, “You should be afraid of not raising your prices.” The thing that is way more dangerous to you is you not raising your prices, because when you don’t raise your prices, you run a business that is header for burnout.
Think about this. They say less than half of businesses survive the first five years or whatever, three years, one year, whatever. If a business is surviving for more than three months, it’s making sales, so if a business doesn’t survive after five years, it’s made stales that whole time. It’s not just not making sales. Therefore, the problem isn’t making sales.
The reason businesses fail is because they don’t have the profit. They don’t have the margin. They are incorrectly pricing their services, and it’s creating a business that is not sustainable, whether it’s financially, whether it’s personally.
People lead to burnout.
I want to show you here just an example that I was running through last night, and when I saw it, I was like, “Man, I got to share this.”
If I want $60, 000 per month, and I’m able to sell this thing at $5, 000 per month, I want you to see the number of calls that are required in order to sell 33 units.
Now, what I mean by calls required to sell 33 units is, we have to get on the phone with this many people, and assuming that we can close one in 10, which are not very good numbers.
It’s a very conservative estimate, but assuming we can close one in 10, that will give us 33 total units at $5, 000. I want you to take a look at this number. 33 units is how many we need every single month, and the calls needed per week.
How many times do I have to pick up the phone? How many prospects we need to talk to is 54 prospects, okay, if I want $60, 000.
Now, I want to show you something here. If I want $30, 000 in profit, okay? I want half as much profit, and I’m only charging $3, 200 for this thing instead of $5, 000, look how many calls I need to do per week.
Let’s compare that really quick.
Let me start to put this two together really closely, so I don’t make this crazy for everybody.
If I want to make $30, 000 a month in profit, half the profit I was talking about before, and I can only charge $3, 200 or I’m only willing to charge $3, 200. That’s really the answer, that I’m only willing. I have to take 74 calls per week. I need to talk to 74 people, and I have to sell 44 units a month.
If I can go from 3, 000 to 5, 000 for whatever it is that I’m charging, I can reduce my number of calls per week by 20, and I can reduce the need to sell by 10.
Now, let’s compare this to if I just want $10, 000 per month, and I’m selling 3, 200, this is the big one that I wanted to show you guys. It’s almost the exact … I think it’s, gosh, darn nearly the exact same if I want $60, 000 a month in profit versus $10, 000 a month in profit.
$3, 200 is what I’m charging versus $5, 000 of what I’m charging. Look at these important numbers. Same number of phone calls, same number of units needing to be sold.
The point I’m trying to make here is that we have weird ideas about price because we can increase our profits not by going out and hustling more.
See, the calls per week and the total number of units that I need to sell per month, those numbers represent hustle.
The higher they are, the crazier my business is going to be. The more I’m going to have to hustle. The more I’m going to have to … My ad spend is going to have to go up and up, and up. It’s going to be so many different moving parts. I’m going to have to hire a bunch of people to maintain.
The higher those numbers are, the more hustle that there is, and I’m telling you from experience, the more you hustle, this is why I can’t stand people who talk about hustle, hustle, hustle, hustle, hustle.
The more you hustle, the harder it is to maintain quality. The harder you hustle, the harder it is to maintain quality.
Now, what you have is this business that’s crazy and going everywhere, and now, you just have these customers that start to get upset because you’re dropping the ball. You’re missing this over here. Little bugs start to crawl everywhere.
The answer to this is not to shut everything down. It’s not to kill your business. It’s not to try new marketing methods or bright, shiny objects.
The answer to this hecticness and this craziness and this stress is to raise your price.
How you raise your price?
The process for raising your price has more to do with what’s inside you, what’s in your head, the beliefs you have around your product more than nearly any other single contributing factor.
What you charge has more to do with what’s inside of your head than how you market your product, than even who your audience is, like all of this stuff.
Yesterday or maybe two days ago, we talked about changing the focus of what it is you offer.
Yesterday specifically, we had that, the question to success. If you couldn’t get paid, what would the qualifications be? That’s the kind of stuff that you need to work on in your head, is to get yourself to a point where what it is that you’re offering, you can charge more for.
This is the real reason why you want to increase price. It’s not about making money. I mean it is, but it’s not about being greedy and how much money can I make? It’s not about, “I need to dominate in my market.”
It’s about building a business that doesn’t burn you out.
Look at this. Same exact level of work to make $60, 000 in profit versus $10, 000 in profit per month. Same exact amount of work. If I wanted to make half as much profit, I would nearly double. No, not double, like 25% increase in my work to make half as much profit if I lower my price. These are important things to consider.
For those of you who know that we have the Happy Writer Program going right now, and if you want to be a blog post writer, and this applies to anybody.
If you want to be a blog post writer or maybe you don’t really know exactly what to do as a service, I recommend that you check out the Happy Writer Program.
I’m going to toss a link here with my little magics. Let’s see if I can do that here.
Go in the Happy Writer Program and learn how to, out of the gates, charge more than you likely are charging right now for probably most of your services.
We’re talking about $200 to $400 per two to four-hour project. $100 an hour. That’s a good place to start this process of rethinking price, of reducing the stress in your business. When you’re able to reduce the stress, it’s like we teach in The No Pants Project, in our core program.
What we teach in there is the idea that higher prices allow for a more peaceful, less stressed, less distracted environment.
If you read books like Mastery by Robert Greene or The Talent Code or any of these books that talk about deliberate practice, which is to say actual focused on the task at hand, not a lot of distractions going on, what you’ll find what from research is that the people who deliberately practice, meaning are focused on what they’re doing.
They’re not running around and going over here and stressed about this and doing all these things.
Those individuals have an unfair advantage in being better at what they do. That is one of the many pathways to justifying higher prices, is for you to build a business that allows you to focus, be calm and be present and be able to deliver a better product than anyone else.
That comes from your ability to create a peaceful business. The peace comes from your ability to raise your prices and to be able to have prices that are sustainable in what it is that you’re doing.
Okay, my good friends. That’s it, so for those of you who are blog post writers or thinking about blog posts, or you want to add something that’s high value to your business, can even be a base product, check out thenopantsproject.com/the-happy-writer.
That program is for sale until February 1st. At which point, it’s not for sale any longer. If you have no interest in being a writer but you still are like, “Gosh, I really need to figure out how to raise my prices,” shoot us an email at help@thenopantsproject.com. We have several other programs that we might be able to place you in, so students can email help@thenopantsproject.com.
We can see if there is a fit for you there in terms of what programs we have in our catalog to be able to help you to do exactly that.
Raising your prices is a powerful tool.
It’s the 80:20, when you look at everything you have to do in business, in the management, in the finances, in the marketing, into this, into that, price is that little nob that controls your lifestyle.
It controls how happy you are when you run your business.
Hopefully, my dear friends, this was helpful to you. I have an appointment with my son to spend the rest of the day being goofy and hilarious and having a good time. I think we’re going to go do some science today, which I’m very, very excited about.
There’s some things here in Portland that are some … There’s a mummy display thing, and there’s some other things around town that we’ve been thinking about we’re going to be going and doing, so we’re going to spend the rest of the day doing that.
I’m able to do that because of price, and that’s not a line. I’m not trying to sell you anything with that. It’s because I purposefully build in margins to allow me to have this kind of space. That’s where the space comes from.
All right, my dear friends. I hope that this was helpful, and I’ll talk to you tomorrow.
