Loading summary
Transcript1 lines
- [00:00]
A
Most business owners are undercharging, and they don't even know it. They think that being affordable helps them win more jobs, but it's actually the reason they stay stuck. If you're the cheapest in the market, you're not serving the customer. You're guaranteed you won't be around when they need you. At 24 years old, I launched my first home security business. Everybody else was charging between $44 and $49 a month. We thought we were smart, so we came in at 42. At the same time, we paid our reps more than anyone else because we wanted top talent. We paid charged less when we should have been here and here. We were here and here, leaving a very tiny margin. This one decision alone led to our business failing and me having to file a bankruptcy for $2.2 million. That's why pricing is the first thing I fix when I walk into any business, because it determines everything else. Your quality, your team, your profit, and your future. Pricing isn't just a number. It literally is a strategy. It tells the market who you are, how you operate, and how long you're going to be surviving. There are three pricing truths that every business owner needs to understand. One, you don't have one customer. You actually have two customers. Customer number one is your team. If you don't charge enough to pay them well, train them well, and keep them, your second customer, the homeowner, is going to lose. When you charge too little. You're not being generous. You're starving your business. You can't deliver elite service with bargain pricing. Number two, a dollar to you is worth more than a dollar to the customer. Let me explain. Here's the simple math. Let's say you charge $100 for your average job. After all is said and done, you're netting 10%, which would be about $10 per project. If you were to increase Your price by $10 to $110 and change nothing else in your process, you would literally increase your profit 100% to $20. You would literally increase your profit by 100%, all by only increasing your price to the customer by 10% percent to your customer. That extra 10% barely registers to you. It's literally everything. Every dollar over your cost goes directly to your bottom line. And that's what allows you to serve longer, hire better, and actually stay in business long term. Now, let's take it a step further. By increasing your price by $10, you can literally add the additional $2 more to the customer experience, thus differentiating yourself in the marketplace by creating a better offer, all while increasing your profit margin by 80%. That is the ultimate win win. Hey guys, it's Chris. If you're finding value in what you're hearing, go ahead and like and subscribe. That way people just like you can find this content for free here on YouTube. Now let's dive back in the show. And number three, the middle of the market is the most dangerous place to be because that middle is for losers in a market priced high to low. When you're the cheapest, you're the Walmart. The only way that you survive is high volume, low margin, efficiency driven, and you're completely okay with selling butt cracks. When you're in the middle, you're pretending to be premium without the funds to back it up, or trying to be the cheapest, but constantly being under bid. That's where most companies go to die. The only safe position to be in the market is here at the high spot. Premium price allows premium products, premium people and premium longevity. That's how you protect both you and your customers, your team and your homeowner. Let's take Walmart versus Louis Vuitton. Walmart's model is clear. Cheapest prices, lowest service, massive volume. It works only because they have a distribution machine that they've invested billions of dollars into. The foundation of the business. Louis Vuitton, totally different play. Their product might only cost 2, 2 to 3 times more to make, but they can charge 25 to 100 times the price. For example, at Walmart you have a $20 toiletry bag that costs $15 to make. That means a gross profit of $5 per bag. Over here at Louis Vuitton, they have a toiletry bag that may cost $40 to make, but they're going to sell this thing for $500. Now that $40, yes, it's two and a half times the cost of the $15 to make, but this produces a $460 gross profit. To make the same profit Louis vuitton makes in one sale, Walmart has to sell 90. When you take 460 and divide it by five, they literally have to sell 92 times the amount of bags. That's what happens when you price cheap. You're literally working 92 times harder to earn what one premium sale could give you. One builds scale and stability, the other builds stress and burnout. When a customer says, why are you more expensive? That's your opportunity to lead, not defend. Ask them, why is it important to you that we're profitable? They're going to think about it and say something like this. Well, because, well, if you're profitable, you'll still be around when I need your help and you're going to be able to honor your warranty. Exactly. The customer now is starting to defend your higher price. Profit is not greed, it's security. And if they're still asking for a discount, tell them, hey, look, we could be cheaper, but only if we start cutting corners in our process of quality materials, trained labor, or attention to detail. Which of these corners would you like us to cut? And lastly, be so confident in your price that you're willing to refer them to someone who is cheaper. Hey, if you're looking for someone cheaper, I'm not your guy. But I do know a couple guys down the street that would be willing to do it for cheap. I'm happy to give you their number. That is how you stand firm on price, with clarity, not apology. When you're firm and confident, it creates a desire within a customer to do business with you. Here's how to reset your pricing mindset today. 1. You're going to go ahead and map the market. This is your homework. Who's the cheapest in your area? Who's the most expensive? Go ahead and write them down. Also realize that chances are you don't fully understand their offer. 2. Find your position. Circle where you currently sit. If you're in the middle, you're in danger. 3. Ask why. What's stopping you from being the most expensive? Is it your mindset, your offer, or just your confidence? 4. Add some value. Don't just start cutting your price. What can you add that makes your offer feel premium, faster service, better materials, extended warranty, financing options or extra support? Last but not least, raise your price. Please do this. Even a 5 to 10% increase can boost your profit by 30% or more. That's what funds better people, better service and long term impact. Your goal isn't to be the cheapest you. It's to be the company that's always standing on firm ground. Because the business that thrives is the one that can keep serving their customer long term. If you found value in this video, make sure you subscribe, comment any questions that you have and be sure to watch the next video.