If You Want To Make More Money, Avoid These 7 Mistakes transcript

This is an intervention. When was the last time you raised your prices? Like your salary is a price, by the way. Your day rate is a price. Whatever you charge for anything is a price. And if you can't remember the last time yours went up, I'm going to rip off the band-aid for you. You're not overpriced, you're under-confident. Like listen, your price basically proves whether you believe in your offer or yourself or what you're doing.

So we're digging into the seven deadly pricing sins, how to reappraise your value in the world, and maybe more importantly to yourself. And today, you're getting marked up. I'm Codie Sanchez, this is The Big Deal podcast. Let's get into it. Before we get into it, my new book Owner Be Owned is dropping September 18th. And to celebrate, I'm hosting a launch event and giving away over a million dollars in cash and prizes live.

Links below if you want to see it and a chance to win. Okay. I want to open this episode with a story. So, if you go back to 1996, a 22-year-old art student dropout by the name of Jeni Britton opened this stand in a public market. She's in Columbus, Ohio, and she started making what some have now called the best ice cream in America. She used grass-fed milk way before anyone even knew what that meant. Her ice cream had like weird flavors, cayenne chocolate, goat cheese, real pie crust, and actual like cherries.

People would drive from out of the state for a scoop. But, Jeni charged only $2 a scoop. Why? Because every other shop around her that was the same thing they charged. So, for the next four years, she made This is what she paid herself, $600 a month. Even when she sold out the entire weekend. So, there's a line out the door, but the bottom line was brutal. By 2000, she's like, "I'm broke." And Jeni's Splendid Ice Cream, she's like, "I'm shutting it down.

I don't have this. I don't have it in me." But the dream still chased her somehow. Because two years later, she runs one last ditch effort, right? On a business plan. And realizes that her ingredients, the high quality sort of chef made ingredients that made her ice cream so good, well, they actually cost her four times as much as her competitors and what they paid for their ingredients. But, even though all of her ingredients were so much more expensive, her price was the same.

So, she was selling like Michelin grade ice cream at Dairy Queen prices. So, what she do? She's like, all right, I'm going to suck it up. Even in Columbus, Ohio, I'm going to open the same stall, but I'm going to double the price. Lo and behold, today, Jeni's Splendid Ice Creams is everywhere and they're doing a hundred million dollars a year in revenue and everybody loves them and nobody's mad at her for raising the prices.

In fact, they're thrilled she did so they can get it in more places. So, why is this story so valuable? Because everything changed when Jeni's beliefs changed because she knew how to price right. So, Jenny 1.0, let's say, was paying what I like to call the fear tax, right? So, her fear of raising her prices was basically starving her business financially. Now, compare that to let's call her Jenny 2.0. Let's go over fear, raises her prices, and does it based on math, but also on cost of goods sold, COGS, plus what her unit economics are, what the underlying business costs, and a little bit of value based pricing, like what other people get out of this.

And she did this because her business needed her to. But, I like what you to apply this to you for a second. I want you to take a step back and I want you to really think to yourself, where are my limited beliefs holding me back? Am I paying the fear tax? And here's the truth, you probably are. So, when we were researching for for the book Owner Be Owned, I basically went through thousands of small businesses over the last 5 years and I analyzed all of their pricing and I found that on average, most businesses are priced anywhere from 30% below or 300% below the price of what they should be selling for.

And it led to this series of archetypes. So, types of business owners that have similar problems and to Jenny and they need the right solution. So, likely this might be you. Like if fear is holding your prices down, your archetype might be the good guy. You can go to ownerscore.com and you can figure out what your archetype is. There's 12 of them. And one way that you might know this is because you charge what feels fair because you don't want to be that guy, right?

Meanwhile, your competitors charge double your rates and their business is booming but you're miserable. Like is that their fault? No. So, this next stat is for you if you're a good guy out there. Again, ownerscore.com you can see what you are. McKinsey actually has this study. They price across thousands of products in every industry and they found that 80 to 90% of all pricing mistakes are from prices being what? Too high?

You're charging too much? No, [ __ ] too low. You need to hear that because when businesses get pricing wrong, nine times out of 10 it's because you are underpricing yourself. Not because you're too expensive or premium. Even though in our heads we think that's why. And by the way, everybody in your life's going to tell you that. Don't ask for that salary raise. Don't ask for that. Are you worth that? No way. Everybody says it's too expensive.

Now, shut up. If you have an 80% close rate, you are way too underpriced in your business. If you have a 60% close rate, you're too underpriced in your business. If you have a 45 to 30% close rate, you're probably sitting just about right with your business pricing. And that's if you have a normal sales team, not even a good one. I recently had another guest on this show, Chris Do. By the way, if you haven't seen it yet, it's incredible watch because Chris is a designer and personal brand coach but his real expertise I think comes from his mastery of pricing psychology.

Check out this clip from Chris. >> The problem that we have is we try to find prices that are low and then lower ourselves to meet those lower prices. We very rarely say, "What are the best people in my space, similarly sized, charging?" We always look for the low one, never the high one. So, I come in with the the with or without you energy. I'm good with you, I'm good without you. My life was fine before you called or sent me an email or reached out in via DM.

And I I want to always be slightly uncomfortable, and I want the client to be uncomfortable with accepting the price. I don't want them to say yes easily. I want them to be a little bit concerned, consternated about it a little bit, and just like, "Ooh, it's a lot, but you know what? You're worth it." >> Chris moves like a pro. He doesn't undercut himself to appeal to lower-level buyers. He says himself, "I am not for everyone." And he prices himself for high-ticket or luxury exclusively.

That's like confidence, confidence, confidence. Also, by the way, way easier to sell fewer people more expensive things than it is to sell a ton of people something really cheap. You know, I was chatting with a founder and looking over her price sheet in in our board room. Uh and part of this is in the book. And I had to tell her, "Your prices are telling me that you don't believe in in your own offer. And if you don't believe it, why should I?" You know, I don't know.

I know it's kind of harsh, but this is just the honest truth. If I'm hiring you, or if I'm paying for your services, I better feel damn confident that when I give you my money, you are extremely confident in your ability to solve my problem. Otherwise, I'll go somewhere else. I will pay more to go to somebody that I have more confidence in, right? So, I want to break down the seven pricing sins. And I want you to figure out exactly how to beat them, because it exists in almost every company, which is why I made a whole chapter about pricing in the book.

In fact, this is so important, I put it at the as the first chapter in the book. Pricing is literally chapter one. So, okay. I want you to keep a tally of how many pricing sins you're committing. We'll add them up at the end, okay? And fair warning, like not to be a jerk, I love you, but prepare for some light to heavy bullying because I do love you, but I want you to get your [ __ ] together and make more money. Okay, let's do this.

Uh sin number one, imitation. So, imitation means you price within 10% of your competitors. Why? Cuz I don't know, that's what they do. You're you're a copycat because you're scared a little bit maybe to break rank. Tell me if that's you in the comments. That was Jenny, right? And in doing so, in pricing just like everybody else, she let total strangers make the single biggest decision in her business. Not good. Never ever imitate.

Don't let your sales people talk you into it. Don't let your friends talk you into it. Don't do it. Go premium. Premium is always easier. Sin number two, delusion. The delusion sin is charging, look at my hands, market rate. I'm making air quotes for you guys who are not watching. Okay. So, who sets the market rate? The market rate is the average of everybody else's fear. It's basically like I mean, most people are broke.

Most business owners don't make any money. Why, dear God, would you price off of what most people do? It's like a poverty pact you don't even know you're signing. So, I want you to remember what Chris Do says and the entirety of chapter one, which is everybody hunts for the low price to match. Uh-uh, flip it. Who What is the best person in your market charge? Price against that. Otherwise, you're unfortunately picking probably the lowest common denominator.

Sin number three, surrender. Surrender means you're discounting 30% or more. And what's so wrong with a discount? Everybody loves discounts, right? This is great. Okay, no. So, for their first like 20 years in business, Bed Bath & Beyond, they never ran sales, which is crazy cuz if, you know, back in my day, when I first bought my little apartment and I was going to college, everything there was discounted, right? So, back then they had 38 stores and were doing $130 million in revenue.

They were motoring. Then this weird thing happens. 1/4 of July, they test a single coupon. Foot traffic goes through the roof. And just like that, they were hooked. Like if you guys remember that big blue 20% off coupon, showed up in every mailbox in America. At the peak, they were mailing close to a billion coupons a year. Whoa. Now, what happened? Their revenue explodes, but their margins And suddenly, they found themselves in a feedback loop they couldn't stop because the coupon became the only reason anybody goes in there.

I remember that. I'm like, "Oh, kind of get the Tupperware this week." It's like their own VP of marketing admitted, what customers really wanted was the coupon. To hell with the rest of the stuff. So, they were late to e-commerce and blew billions on stock buybacks. There were other dumb mistakes they did. But the real thing that they did was discount because the coupon had already eaten the margin that would have bought them time to make up for their other dumb mistakes.

And so, you know, they fold. In 2023-ish, every single store closed. And I think that's what deep discounting does. It trains customers to buy the discount instead of the product. So, if a customer only says yes at 30% off, that is your price now. So, don't surrender. Set your price where it needs to be and never discount. I want to talk about sin number four. Hustle poverty. So, the sin of hustle poverty is a dangerous one because it only emerges in success.

So, look at you. Let's say you're fully booked now. The line's around the corner, the calendar's slammed, the waitlist growing, yeah, yeah, yeah. But think about it for a second. Let's say you run a restaurant. If the line's out the door, that's a clear sign of in some ways a pricing error unless you have high-volume, high-speed sales. If you're fast food, like pop-up bagels, the line is great. You move through that [ __ ] fast.

But if you have a restaurant where people are leaving cuz they can't get in and you're booked past 90% capacity and you have a bunch of people that can't get in at all, I don't know. Raise your prices 20% higher and watch how nothing changes. Evidence shows the increased revenue will cover the tiny number of customers who will bulk at the higher price and you'll walk away with more money and less work, which is the dream and why we do all of this because success is like maximum price while remaining booked.

You don't want to hustle yourself into poverty. Like could you think of anything worse than working harder and making less money? It sounds awful. So we've got sin number five, the hero complex. If more than half of your deals only close when you close them, you have an a hero complex business, which sounds cool, it's not, it's actually a nightmare. Hero around here is a four-letter word. Here's why that's a pricing sin.

Let's say hiring a salesperson costs you money and that money has to come out of your margin. Okay, that's fine. But if your price is too low, there's no margin. There's no extra cash. So you can't actually afford to hire a closer, which means you end up doing every sales call yourself for free 99. The solve is you raise your price until each deal has enough margin to pay a salesperson, then you hire one. Because the secret to actually scaling your business or your life is don't be a hero.

You actually want to build a little team of adventures, not just be Superman all by yourself getting beat up all day. Sin number six, doormat work. So if half of your customers demand customization and you're charging a standard price, bump it up. I don't want you to try to be that Michelin starred restaurant and to get a grab and go, right? Like you got to pick one. Custom Custom work at standard pricing means you're effectively donating your margin to your pickiest clients.

That's called being a doormat. It's a pricing sin. We don't [ __ ] with that. The solution is to create a menu. Menus are simple, right? Clear about what the customer gets, product and price, what you deliver, product and price. If you want off-menu, great, but that's going to be an off-menu price. Most people just become doormats, and they become like an amoeba shaping into whatever the customer wants, and amoebas are really hard to replicate.

And finally, sin number seven, self-extraction. Ask yourself this question, all right? Tell me this. Could your current price pay somebody else to deliver the work and still leave you cash on the side, profit? If the answer is no, delegation is mathematically impossible for you. That's not good. Even if you love your business with every ounce of your being, which I do, at some point you're going to want to take a nap, a break, a vacation.

You need that. You want margins that will allow you to eventually replace yourself with someone better than you at that one particular part of the business. So, remember, price yourself to replace yourself. Okay, those are the seven pricing sins. Now, it's tally time. All right, remember in the beginning when you were going to rate yourself? You know, pause the video if you haven't, go listen to it again, this part's really important.

If you committed three or more sins, congrats. You may pass go and collect a price increase. You can thank me later. You know, there's I was looking at this the other day. There's somebody in the Contra and Growth Boardroom named Charlie. He's actually in chapter one, so you can associate with him. Charlie had two kids, full-time media job he said was temporary, right? Temporary turned into like five years. He hated his job, the company was a nightmare, the CEO was a narcissist.

He spun up a business, a $5,000 coaching program for job hunters. So, this is going to be a side hustle. His His dream was to break 500K a year and quit his job, but it felt completely impossible. Now, Charlie had a real skill. He had a background in publishing and writing. He had collaborated on books that sold lots of copies. He was great at helping people write books, but Charlie was paying not only the feared tax, but we'll get to this later, and tell me if you guys want me to do an episode on it.

He also had a terrible avatar. Somebody trying to get a job doesn't have any [ __ ] money. Okay, but he was also paying the fear tax. His fear was forcing him to cap his prices and also who he thought he could deliver to. He was going to help this like poor helpless unemployed person. And then we were like, wait a second, Charlie. What if you could make $500,000 from one phone call to the right person? And instead of doing these job hunter people, you're going to go to authors who have cash.

And when they ask for help on their next book, you're going to write a proposal for a $40,000 flat fee. Not 5,000, 40,000. I wanted him to start higher than 40,000. Why not go to 50 plus a cut of the profits 500 See what you could get. He started at 40. And what do you think the author's response was? Cool. Where do I send the first payment? He had even priced himself then. So, Charlie started grinding on his outbound.

He made eight more calls, five said no, three said yes. In a few weeks, Charlie signed more than $400,000 new clients. I think he could have done a lot more. And since then he has. He's quit his job, made five times his old salary on half of the hours. The clients got better results cuz he wasn't spread across 100 needy inboxes. So, what it what actually changed? It really his product didn't change. But pricing, that is it.

He stopped staring sideways at what everyone else charged and started looking at how to own a slice of the value he himself created, value-based pricing. He wanted to own a piece of his upside. Now he does. This value split pricing is like one of the most key things you can do in business. And I break it down in in like specifics because sometimes I think it's easier to see it in a like graphical table way like you can see right here.

I guess this is page 42. But here's what you do. First, you determine how much money does your work make or save your client each year. Then, I want you to take that number, plug it into this equation. I'm going to put it up on the screen, but it's basically your price equals 10 to 20% of the value you created for this user. You charge 10% of that value if you're unsure of your delivery. Like, you're not a stud yet, you're kind of starting to figure it out. 20% if you're pretty confident, and up to 30% if you're awesome.

The client keeps that 70 to 90% of the upside. Everybody wins. So, I've seen this time and time again when we take people through our pricing model. Early on, for instance, even I fell prey to this. So, I used to charge like a thousand bucks a year to help people buy businesses worth a hundred thousand, five hundred thousand, a million, three million dollars. That's like pennies on a life-changing income that's going to make them six or seven figures.

Then, I ran the numbers, and 40% of our customers had a seven-figure net worth outside their home. The customers could pay me just fine. But, it was our beliefs at the company that were the bottleneck. And in this one, you guys, it wasn't even mine. Somewhere in your business right now, one of your employees is costing you money if you have any. And they're not doing it maliciously, they're probably great. But, they just don't realize how much money is out there in the world.

And so, they're concerned about what it's expensive when your customers don't give a [ __ ] as long as you deliver the value. So, your value split number will scare you. And it'll maybe scare some clients, too. But, I want you to ask this one question that I like to ask anytime somebody goes, "This is expensive." I I like to say, "Compared to what?" An agency owner once told me, "Everyone loves my pitches until I get to the end and they realize my retainer is 5K a month." And I just asked him, "Do you ever say, 'Compared to what?'" Blank stare at me.

We rewrote the pitch. More to go like this. Hey, Mr. uh business owner, your funnel is leaking about a hundred thousand dollars a year. In 90 days, we plug it, we add 8 to 12 grand a month in profit. If we don't, fire us and keep everything we've built. The fee is only $5,000 a month. Suddenly, 5K cheap. A price is only good or bad by comparison. So, control the comparison, anchor it to the cost of doing nothing. Bam, there you go.

I think so often we forget that the way to sell things is never to talk about the price directly. It's to say, "Hey, I think oftentimes people misunderstand pricing, right? And you have something called an opportunity cost, right? You're familiar with that, aren't you? Right? Yeah. Can I explain to you how we think about it here? All right. We think that every day we don't take an action that could make us money is costing us a certain percentage of the amount we could make per month.

Is that right? Yeah. Okay. So, if I've got 30 days in a month, and I know that every month I wait, it's costing me $10,000 in order to not move forward with this service that I offer. Um that means that if I wait to sign up for you, I'm costing myself $30,000 when I could have instead paid 5K a month. Is that right? Yes, that's right. This comparison is so important because what about the opportunity cost of of doing nothing?

Too often in sales, we think only with the price we have to put cash down now, not all the money we're missing on the table. And there's actually a famous Harvard Business Review analysis that found that for the average company, improving price by just 1%, even if your volume, so the amount you do stays flat, is going to lift your operating profit by 11%. So, raising prices beats cost cuts, and it beats volume increases.

So, I want to talk repricing, and I'm going to leave you with like my five-pronged framework for repricing yourself. Step one, I want you to set your floor and ceiling. So your ceiling is the full value you create. Your floor is double what you charge today cuz anything less than double isn't worth the sweat. So then gut check your margins, so how much money you keep or take home with a simple ratio, four to one to one.

So for every $4 of revenue you get, every $4 that a customer gives you, $1 is what it costs you to get the customer, $1 to serve them. That means you have $2 left for you. Most businesses run three to one to one or worse. So if that's you, you just found your room to grow, your floor and ceiling. Step two, I want you to take this philosophy and book 10 calls this week. You can list your three favorite clients, the ones who got massive value, never whine about price.

Would you call them and ask them who they know? Because your 10x buyer is one zip code over. And literally I wrote these scripts down for you. They're on page like 50 and 52, 53. I want you to say something like, "I'm expanding what we offer and I trust your opinion. Can I take 30 minutes from you on Tuesday or Thursday morning?" Flattering, low pressure, easy yes. You need 10 conversations. Some will suck. That's why you do 10.

But a few will hit. And then step three, you're going to ask three questions and then shut up. Okay, given this issue, where do you want to be 12 months from now? Okay, how far are you from that today? All right, what's the gap costing you in real dollars and hours every week? Then I want you to recap their answers in their exact words, then ask permission to send a proposal through. You leave without ever naming a price.

Really important, do not say a price on the phone call. Then I want you to write a very short, one-page email with two options. Option A is your ceiling offer. Remember, uncomfortably high price, white glove everything. Option B is your floor offer, the one you actually want signed, still at least double your old price. You're going to send that in an email, nothing fancy, no PowerPoint deck. You're just going to say their problem back to them in their exact words, the two prices, and one sentence comparing your fee to the cost of doing nothing.

Bam, step five, hit send. I truly believe momentum dies fast. Like, literally the number one reason why you're not richer is you don't take action fast enough. I'm sorry, that's what it is across the board for every single person inclu- including me. I'm not richer than I want to be because I don't move fast enough. You aren't richer than you want to be because you don't move fast enough. If you can move fast on one thing, it should be this or coming to the book launch.

I do not want you to discount. Do not flinch. If they say it's too expensive, just ask one question. Too expensive compared to what you expected or compared to the problem? And if they try to negotiate you down, I want you to again reiterate, "Well, compared to what?" And then I want you to go to option B. "Okay. Well, if you aren't ready for the speed and investment of one, then option B is for you. The deal stays alive and your margin never mou- moved an inch." If you run all five steps, you may be standing where Jenny stood.

Like, everything was the same, one number changed in 2002. A hundred million dollars a year business is not that hard to do when you price things correctly, when you have the right product, and when you go through the other 12 P's in this book. I'll leave you with this. Nobody will ever pay you a number you're too scared to say aloud. It's just not going to happen. Your price is the first thing you tell the world about your work.

So, say set it high, say it loud and proud. And if you want to dig deeper into this, check out the new book Owner Be Owned. Go to ownerbook.com. You are going to want to come to this launch because in here on September 18th, there are the 12-step process for figuring out how to find more profits in their business. There's the owner archetype to figure out what type of owner you are, and we're giving away a million dollars in cash and prizes live.

What's cool about this? We could never do this unless we had very profitable businesses. So, we are living the example we're showing to you. And if this episode made you rethink your price, then do the craziest of things. Send this to an underpriced friend you know. Tell them they need to raise their prices, and hit subscribe so I can keep making these for you. I'm Cody Sanchez. This is The Big Deal. We'll see you next time or at the launch ownerbook.com. >> [music]