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What's going on, everyone? Welcome back to the game. I have a audio first episode for you guys today. This has been something that's been kind of top of mind for me, but it's about some things that you can immediately sell to make a lot more money in the business. And I think this is something that's wildly underused. And so I want to say a month ago I had a business that, that came out to our our headquarters. It's an advisory practice customer and the gentleman had a very large business that had many automobile sh. And in talking to him more, it was a very razor thin margin business. As you know, he was detailing it. And one of the things that he had was a certain niche type of customer that had tremendous costs incurred for the amount of time that their trucks or cars were off the road. Something to the tune of like 10 to $20,000 a day in lost income. And what was interesting is I said, okay, I'm guessing these guys are not price sensitive. And he was like, no. And I said, well, do you price it differently for them? He said, no. I said, but you have other customers or the vast majority of your customers that if it took a week to get their cars or trucks back, it wouldn't really make a difference to them. He said, right. It's like, okay, so what you're missing is basically a surge price or said differently, a speed pass. What I want to talk about is a couple different ways you can implement this in any business. And what's really cool about this type of kind of offer or value consideration is that it's 100% margin. So think about it like if you deliver anything, let's say you build decks for a living, it doesn't matter. And you have your standard, let's say you have a 30% margin in the business after everything. Okay, fine, great. If you build that in three months, cool. And maybe you can only take on a certain amount of projects. So you build them, let's say in sequence. So you build, you know, customer A and then customer B and the customer C. Well, it makes basically no difference to cost for you if you do a, B, C or cab. Right? Like, it wouldn't actually change anything for you. You're going to have the same number of people and you're going to deliver over the same time period. But the thing is that customer C might be willing to pay two times more to get it done faster for us as business owners having the offer available for people to get what they want faster. I mean, if you think about this, in the e commerce world, you can obviously always pay for faster shipping. It's almost like it's an obvious thing, but for some reason in the services businesses, people don't do this. And I, I'm still always lost to why. Maybe it's because they don't think about it, which is why I'm making this podcast. But for this individual, when I was talking about the, the auto shop thing, it just felt like such an obvious thing. Well, okay, well, if it takes you normally a week to get this stuff back and the vast majority of customers don't care, but a small percentage of customers do care very much about time and they're losing thousands of dollars every, you know, every day or tens of thousands of dollars, then it would follow to have a speed pass that would allow them to get priority. Right? Because somebody else doesn't really care if it adds a day to their service. And so they're willing to pay the standard rate, whereas somebody else, it does matter a lot. And so they're paying for fast shipping. Right. Fundamentally, that's all we're doing here. I would say that for me fundamentally, and I'll talk about the second way that you can use this in a second. But for me fundamentally, I've really shifted, I mean, a lot of my thinking around creating products and services. I mean, I go back to the value equation because it's so core to how I do everything. But like, you've got the impact or outcome, you've got risk, you've got speed, and you've got ease. Like, these are the elements of value. Like, I have yet to find anything else that are not those four elements. The thing is that each of these elements can be traded in and out in the services space. It's very common for people to add features or, or remove features of services in order to have different prices. That makes sense for a lot of people. But what they don't do is they don't actually change prices on speed or risk. Right. And that sounds odd because those are huge elements of value. Just since I'm going to keep this, this conversation focused on speed for today, I think a lot about, like, what could I do to do something faster? And sometimes to do something faster will cost you more. Like if you're in home services, for example, and let's say you do kitchen remodels, it's like, okay, I could, you know, do your kitchen first. And so either I use. You basically have two options. You're either using resources from another customer and deprioritizing somebody else who doesn't care about speed as much, which is the simplest option. Operationally, you just change the sequence of delivery. But your actual kind of like fixed costs say more or less the same. You're just changing orders up. So that's pure profit, which is awesome. The second way of doing this is that you have surge support. So you say, okay, well, what would it take if I were to try and get this person who normally I deliver this in three months to deliver it in one month? And let's say for that person, they're willing to pay two times to three times as much. Now, you may be surprised by this, and I want to encourage you to not sell out of your own wallet. Which is a pretty common thing for business owners is they say, well, I would never pay for something like that. Well, good thing that you're not your customer, because you probably already know how to fix cars or you probably already know how to fix or build decks or make or, you know, make do a kitchen remodel or provide whatever service you have. And that makes you not your customer because your customer doesn't know how to do those things, which is why they're paying you, right? And for them, the value may be really big if it comes really fast. Let's just use a hypothetical here. Let's say that for you to build out a kitchen, right, it's going to cost you. If you wanted to rush, right, and say, hey, you know, Mr. Marble supplier, Mr. Granite supplier, or Mr. Cabinet supplier or whatever, I need these things by, you know, next week or by two weeks from now. What would it take? That's the question you ask, what would it take? What would I have to pay in order for that to happen? I have a customer who's willing to pay whatever price. I can do it within reason to make it worth your while. And so then it's back to them. And so what you might find interesting is that they might say, well, you know, I could rush it. And it probably cost about 20% more. It might cost 50% more. And you might say, cool, done. Because guess what? If you have to pay 50% more for your cost of goods, and let's say you also pay 50% more for labor, fine, okay. But if you charge double or triple the price, not only do you make more absolute profit, if you try charge triple the price, you're going to make more gross margin percentage too. So, like, you're going to make more money by percentage and absolute with this offer. And to make matters even better, you're Gonna be able to deliver something way faster than normal. And guess what happens then you get more word of mouth. People are like, holy cow, this guy can deliver fast. And I'm telling you, having been, you know, I mean, I would say having been in business for so long, it's not true. I haven't been in business that long. I've been in, you know, 13, 14 years, whatever it is at this point. Shoot, it might be longer than that. Anyways, point is that speed trumps so much. Like when Spotify was competing with the Internet of online downloads, which were free, Spotify beat free because it was fast. Think about how crazy that is. Like, if you're. I remember. Like, I remember another time, another example of this for Halloween, Chipotle does the like. If you. If you wear tinfoil or you dress up like a burrito, they give you a free burrito. They do it every year. I don't know if they still do it, but they used to do it when I was younger. And I remember thinking to myself, I went to it as a business owner later on in my life, and it happened to be Halloween for me. It was just whatever day of the week Halloween fell on, and I just needed to eat lunch. And I saw this line out the door, and I was like, my God. And I thought to myself, I was like, man, if I could just pay $30 to have my burrito now, I would, so I don't have to wait in this line. But then it just got me thinking yet again of like, how valuable speed is, because fast beats free. And so the thing is that delay is the thing that people hate most. Like, think about how Amazon won and Netflix won. They won because of speed. Like, you want to look at movies. It's like instead of getting in your car and doing all that stuff, you just turn on your television. You can browse an unlimited selection. It was fast. It was right there. Now, obviously, convenience and ease kind of factor into play there as well. It's immediately available. And so if you can try and sell speed now, I told you there was two comp. Two types of speed that are rather surge pricing that I wanted to talk about. The second is a little bit different. Okay, so the second here is. And now all of these are based on demand, right? So to be clear, like, you have some people who want things faster, and so you give it to them faster in exchange for more money. Everybody's happy. Another situation is where you have uneven demand cycles. So a very common example. This is like restaurants. And so I just did A Cash Cows episode this week. And if you don't know what Cash Cows is, it's the new kind of pseudo TV show that we've been producing. It's on my YouTube channel. There's. I've been, I've been, I've been waiting to do this for like over. It's been more than a year. It's been probably almost two years now that I've been kind of like wanting to do this. And it just takes a huge amount of resources for every one of the episodes. But they're. The first two episodes are out. Basically. I kind of do like a mini shark tank, except I don't buy the business, I just help grow it. So it's way more tactical. Like it's the most positive feedback I've gotten on anything I've ever made. And this is specifically for business owners. So it's hardcore business content. I think you'll really like it. Anyways, I think some of you guys have heard the podcast version of it, but if you haven't seen the video version, I think the video is even better. Anyways, so we have a Cash Cows episode that's coming out and it's my show, so I can spoil whatever I want. The restaurant owners came in and there's a number of things we did to the business, but one of them was they had a lot of people come on weekends and not as many people come during the week. And this is pretty common for restaurants, right? Is that they get more demand on, you know, Friday, Saturday, sometimes Sunday than they do, you know, the rest of the week. I said, well, do you have the same menu on weekends? And they said yeah. I was like, well, have you considered just taking, just reprinting the menus and having a weekend venue that has, you know, 10 or 20% higher prices? They're like, huh? I was like, if you have a line out the door that lasts an hour, right, and you can't even service the demand, then when price and demand, sorry, when demand goes up on a price curve and it surpasses supply, you shift price up. That's fairly standard. But I say this quote fairly standard, but the vast majority of businesses don't do it. So very standard from a theoretical perspective. Less so from a practice angle. And the thing is in a business that's like food, where you're running usually paper thin margins, if you have 104 days a year, so two days, you know, your two weekend days per year and let's say that on those days you do half your volume, alright? Remember, you're doing more volume in those days than you do the other five days of the week. So 50% of your volume, if we can add 10 or 20%. If a business is running 10% margins, then us running just a 10% price premium on those days adds 5% to the absolute margin. And so what does that mean to the business? It's a 50% increase in profit. If we had a 20% increase in price, then it would be a 10% absolute increase because it's 50% of the revenues coming on weekends, which would double the profit of the business. And so the thing is that there's all these tiny little levers that exist in a business that I think a lot of business owners under appreciate or they're honestly just too afraid to implement. They're so afraid of, you know, what happens if someone says no? It's like, well, are you offended when you buy a physical product and it says fast shipping for an extra 299? No. If you don't want it, just don't take it. Right? Like, if you're at the mechanic shop and he says, hey, how important is this for you? You know, how fast do you need this done? Because we can basically, we can prioritize your thing and do it like, literally, we can make yours next in line, as in, like, it's the first thing we worked on. Or we have our standard turnaround, which is, you know, you're fifth in line right now, and we'll probably get it to you by end of day tomorrow or whatever, right? If someone says, end of day tomorrow is fine, then you say, cool, that's great. But if someone's like, no, I really need it back because I got to pick my kid up and it's the only car I have, it's like, okay, well then here's the fast pass price. And they might be like, great, because I don't want to have to pay somebody else to do this. And this actually saves me money. And so, again, this is where, like, you just don't want to sell out of the wall of the customer and assume that you know what they want, that you know what's best for them. I could say the vast majority of human error that exists, you know, from a politics perspective is people making rules for other people and assuming that they're the same. People are very, very good at allocating their own capital and their own time for their own benefits. Like, capitalism is built on this idea. Like, we're pretty good at getting what we want for ourselves. And most People are very bad at determining what everyone else in a wide population that doesn't represent them do want. Right? This is why I'm an advocate of smaller government personally. Anyways, every business. So zooming back out, whether you're in physical products, Whether you're in SaaS, whether you're, whether you're in services, you should consider two different lenses for surge pricing. One is the fast pass which we talked about first, which is is there some way that we can either reorder our delivery for customers or drag our customer delivery up faster and be willing to pay maybe a small premium in cost in order to get a big premium in price that would immediately drop to our bottom line? Because speed is 100% profit. Think about that. Speed is 100% incremental margin, especially if you just do the reordering of customers. If it makes no difference for some and makes a big difference for others, all profit. If you have to do search support in terms of added cost, then sure, you eat a little bit of margin there, but you still can make more absolute money and you serve those customers better. And I think you'll get more word of mouth. And then obviously on the surge pricing side, if you have uneven demand or you're seasonal in the nature of how your business runs, or it's end of the month versus the beginning of the month, things like that, every business is different. Consider having pricing that affects that and I'll give you a different example. So it can also be on a micro level from a day to day perspective. So in the gym space, the 5pm class or 6pm class is usually those two classes are some of the most packed sessions as you might imagine. But it was never crowded. 7am it was the deadest time that we had. And so when I think about that, I think, okay, well then maybe there should be two memberships. We should have peak hours pricing and off peak hours, right? And so for people who do care about I can only come in this time, then they can pay the premium. And for other people who have more flexible schedules or work from home or work for themselves or they have shift work or whatever it is, then they might be willing, they might be happy to get a discount to come to the less, less packed times. Which is good for you as a business owner because think about like this. Let's say your 6pm class is oversubscribed, right? So you only have, let's say 30 bikes, you know, and so you can only fit 30 customers. There's. But let's say that if you had availability there, you could fit up to 40 people. All right, well, the thing is that there might be people who are in that class who could otherwise come at different times. They just have no incentive to. But if you gave them the incentive, then you would be able to service more customers, because the 10 who can't make any other time go to another gym because it's not convenient for them. And so you make it convenient for the most amount of people by appropriately pricing your supply to meet the demand. And so, again, this literally works in any business. If you're a hair salon girl, like, everyone who's listening to this, and it's like, well, this doesn't work for me. It works in every business. Like, stop. Speed is always a component of purchasing, period. If you're a hair salon girl, I'm gonna bet that your Friday and Saturday probably is more busy for cuts and colors than Wednesday afternoons. And guess what? That means your cut in color on Fridays and Saturdays should probably be 20% higher. And for people who doesn't matter, or they're not doing it because they're going out that night, but they're doing it because they just need to get their monthly cut in color, then you charge normal, and you charge surge pricing for Fridays and Saturdays. And for those of you who have this, like, this weird issue with thinking that, you know, what will my customer say? It's like, well, your demand will go down on those days, and then that means that you will not have to turn customers away. And then you can adequately serve everybody. You can literally like, the perfect pricing model, which is very difficult to do in reality, is that every single person would pay what their maximum willingness to pay is. Now, that is theoretically great, but practically impossible. And so this is where data is useful. So we can just get our best pockets where we know that these are indicators of high demand, like weekends or, like, you know, peak hours at the gym. There's always these types of pockets that exist in any business. And we just try to. And you think Facebook doesn't, for example, when you're running ads, what do they do? Surge pricing is during Q4, when all the Christmas shopping happens. Cost per impression skyrockets. If you're an Uber, like, if you order an Uber at Friday night at 10, you're gonna pay two and a half, three times more. So, like, are you offended? I mean, if you are, then you don't understand how capitalism works. But maybe you're offended, but you still buy and you still don't use anything else. Right? And so I just I would, I would encourage you to one, if you're a chicken about it, just change it for new customers and then it'll slowly, like new customer, you know, old customers will slowly, over time cycle out and then new customers will cycle in at the higher price. But I would encourage you to just say, like, listen, you can always like, you can blame it on inflation if you want to. You can blame it on costs of goods going up. You can say that you only have, you know, that your rent got raised. Blame it on whatever you want. If you want, you can put it to an outside power because you're afraid of just saying, I decided that I wanted to charge more. But if you want to blame it on something else, you can. Fundamentally, I think that if you have more demand than you have supply at given times in your business, then it means that you were mispriced and so you should consider maybe just raising prices at those times. So that being said, I hope this found value. If you are a business owner and you like this type of stuff, we have our advisory practice which we stood up last year, which has honestly been really amazing. The reception has been exceptional. I've been really stoked about it. It's one of the business I've been most excited about starting. But yeah, we have business owners out here. I think the last time I think I looked at the data from four consecutive days and the average person in the room was 4.1 million, median was 1.2. To give you an idea, so we do have big businesses in the room as well. And so if you're a business owner and you like these types of kind of profit, profit driving tactics, you know, this is a podcast, but if we do two days and we know what your business is, we probably help you out a little more. I'm sure you can find it online. Acquisition.com. just click around. If you can't figure it out, then it's not for you. Hope you guys have an amazing day. Share this with your friends. It's the only way that this podcast grows. And so thank you. Love you all and talk soon Real quick, guys, I have a special, special gift for you for being loyal listeners of the podcast. Layla and I spent probably an entire quarter putting together our scaling roadmap. It's breaking, scaling into 10 stages and across all eight functions of the business. So you've got marketing, you've got sales, you've got product, you got customer success, you've got it. You've got recruiting, hr, you've got finance. And we show the problems that emerge at every level of scale and how to graduate to the next level. It's all free, and you can get it personalized to you, so it's about 30ish pages for each of the stages. Once you enter the questions, it will tell you exactly where you're at and what you need to do to grow. It's about 14 hours of stuff, but it's narrowed down so that you only have to watch the part that's relevant to you, which will probably be about 90 minutes. And so if that's at all interesting, you can go to acquisition.com roadmap road map Roadmap.