2 ways to scale a service business past $200K FAST!

Cut the prices, penetrate the market dominate and undercut the competition.

When it comes to growing your home improvement business, you can easily build it to a million dollars in revenue simply by using one of these two methods. Now there's other ways of pricing and there's other ways of thinking about your pricing strategy, but these two are the ones that you really need to know because they are the most popular when it comes to building a business to a million dollars in revenue. My name is Mike Andes. I'm the founder of Augusta Lawn Care. We have over 90 locations around north. And today I want to talk about these two pricing methods, these strategies you can use to dominate a market and build a business quickly, not necessarily the most profitably, but how to grow a business fast. The first method is not used a whole lot in the service industry, but it is absolutely popular in product based businesses and in larger companies. And it's called penetration pricing. Penetration pricing is used when you want to take over a market in order to gain market share, you just cut your prices dramatically. You might even lose money on every single product or service that is given in order to just get market share. And this is the fastest way to grow because price at the end of the day is always a piece of the buying decision. And if you can just wipe out your competition by undercutting them all, you can get very quick market share. The reason this is not super popular with the service based businesses like lawn care, landscaping, roofing, fencing and a lot of home improvement businesses is because we do not have high, high margins of 80, 90% that a software business might have or even a product based business. For example, Netflix might give away free months of service in order to get you to sign up. That is penetration pricing. It's free or very, very discounted from a period of time where they're actually losing money per subscriber in order to just get market share. Same thing with an example like Gillette that sells razors. They actually might lose money on the initial razor that they sell you, but they know that you're going to have to buy the blades, the replacement blades, and they'll make 80, 90, 95% margin on, on those products. And so in that case, the goal is get market share and then the objective is all about retention, keeping that customer so that they can actually move the price up and get profitable. Now this is not super popular because a lot of times it takes a lot of cash to do this. It takes a lot of venture capital, takes a lot of public money, and that's why usually bigger Businesses will use price penetration as a method of growing and scaling their business. What is most popular when it comes to small businesses and service based businesses is what's called skimming. Now skimming is not only popular in service based business, it's also popular in high tech and very manufacturing dense type of products. For example, Tesla is a prime example of price skimming. When they created their first car, it was worth and it was sold for well over $100,000 just to buy one. Over time as they got market adoption and they actually brought the price point down on their vehicles to the point where they were selling cars between 30 and $40,000 with the model. Ultimately the goal in price skimming is start off with a very high priced product where you have a lot of margin in order to cover the expenses of R and D research and development and growth and expansion. The reason that Tesla was able to build a car for 30 and 40 thousand dollars is because they originally had people buying that same car or an equivalent car for 150, $200,000. And they were able to make a lot of margin profit on those cars and put all of that money towards research, development and growing the business. And this is actually what's used most commonly when a business is trying to take over a market. In the service business, because we don't have millions and billions of dollars to do price penetration and lose money on every customer. So what we do most of the time is we start actually with higher prices. We are charging a customer a premium price for a premium service and we customize that service to so that if there are people in our competition that are trying to cut below our prices. You know, this is Chuck the Truck. This is the guy that's offering a $20 mo in the lawn care and landscape industry. This is the person that drives down with an uninsured vehicle and under the table workers and does everything for half off and beating the price of every competitor in order to beat those people out at their own game. What you have to do is charge a premium price and then have a margin that then you take that margin and, and use that margin to get more customers. Now how do you get more customers using that margin? You're gonna use that money to do marketing and advertising. You're gonna use that money to have a professional website. You're gonna use that money to have more professional employees. And the goal is to prove the value to the customer. By having that higher margin you can afford to improve the value. Having someone to answer the phone, having a professional image and Uniforms and all the rest of it that costs money. And so you need that higher margin. You're gonna use that to A, increase value or B, you're going to use it to acquire more customers. Because the chuck in a truck, the guy that's price, you know, penetration, just trying to get customers for very, very low price. The only way to beat him as own game is the fact that he does not have enough margin to produce value to the customer, nor does he have enough margin to go spend on advertising and get more customers. However, because he's undercutting everyone so much on price, he might have an 80, 90, 95% close ratio, whereas you might only have a 30 or 40% close ratio. In other words, the, the number, the percent of jobs that get accepted when you give a bid might be much lower than the person that's undercutting you on price. However, because you have that extra margin, your prices are significantly higher. You take that margin, deploy it into marketing, which brings way more leads in. So even though your close ratio is lower, your number of leads and the number of new customers coming in is actually much greater. So these are two ways to grow your business very quickly. And there's absolutely a balance. And I truly believe that actually alternating between these two methods is actually a very smart way of growing your business. That is in some services looking as a entry level way to get them in the door and then having higher margin services that you can upsell those customers and make them more profitable. As well as a way to have very high premium, high touch services that allow you to have higher margins that might get you 40, 50% profit, net profit at the end of the day after all your expenses are paid. And then you use that money to go spend on advertising and then creating better value for your customers so you continually get more customers even even though you have higher prices. So these are the two ways to grow. Either A, you go price competitive and you just cut the prices, penetrate the market dominate and undercut the competition. You're going to need cash reserves, but you're going to do this very quickly. The second way is charge a premium price, but then take all that profit and shove it back into the business in order to produce more value for the customer and promote, advertise and market to be able to bring in customers. So even though you have a lower close ratio, you still get more business. If that was helpful, check this video out here where I talk about the one marketing tactic that you need. You don't need to know a whole bunch of complicated thing. Just know this one thing about your seasonal business that'll take it from zero to a million dollars in revenue.