Are You OVER or UNDER Charging in Business? Fix This To Get More Sales

A lot of people play in the kiddies pool because it feels safer to play there. But I can tell you right now, you're leaving so much money on the table rather than going into the big medium sized businesses that have the money that will value you.

When people start business or they get into business, we recommend they come in from a safe financial position, therefore they don't need to overcharge, therefore they can get runs on the board, therefore they don't get deflated when things don't go well.

Realistically, if people aren't buying at a cheaper price point, it's probably a wrong price product market fit and you actually really need to look at the offer again.

Welcome to the successful podcast. We're on episode 58. Today we're talking about nailing your pricing and getting more sales. So on the successful podcast, we have three, three types of show. The first one is Finger on the Pulse, where we discuss a topic in pop culture, the news and media, and how it relates to you as a business owner. We'll give you our insights, key takeaways, and unsolicited opinions on the topic. Our second type of show is Upskill, where we deep dive on a topic and give you actionable tips, tools and hacks that you can use straight away in your business. And lastly, we have Schooling where we dive into three audience questions and answer them for you right on the show.

Before we dive in, Tim, how are you feeling? That was a beautiful new intro. Congratulations.

Yeah, thank you. That was not red at all.

Read it off a script if you're watching on YouTube.

Definitely looking at my leg on my phone. I'm doing all right. I'm actually feeling a little bit better. I'm not wearing this ugly outfit I wore for the last five episodes that was littered on my Instagram. I was like, jesus Christ. Why did I. Why did I wear that for five straight episodes?

I feel like I want to go.

We filmed it all at the same time and I was like, jesus Christ. It was literally five weeks of content of me just looking like a foot.

Did you not dress well?

No. And today I was like, just wear black. That's your color. Oh, just do it.

I have to go have a look now. I'm so sorry you had that experience.

Yeah. Anyway, how are you?

Yeah, I'm feeling really good. I am pumped. We love our three new episode ideas, guys. We hope that you love them too. So last week you had the first installment of the of the Trad Wife, which is of course the Finger on the Pulse. This week we want to dive into upskill. And so let's get straight into it, Tim. We see this all the time in entrepreneurs and small business owners, especially when they're first coming into success school, but also just like in our DMS and in our conversations we're having with people before they join our program. Because once you join our program, we nail it, obviously, and even then, sometimes it takes some time. Okay. But pricing is probably one of the biggest mistakes that we see in most entrepreneurs and usually for two kind of common reasons. Right.

Definitely. With that in mind, what are the two biggest mistakes that we see in small business when it comes to pricing? And let's just say small business. Under five mil?

Yeah, definitely under five.

Under five mil.

Yeah. Yeah. So not just like small business, like 100 grand a year kind of thing. Small businesses, we are still small businesses as well. So the two biggest mistakes we see are chronically undercharging and probably, I would say, overcharging without the reps. Yeah, yeah. So the chronically undercharging phase is like, you've been doing it while and you're pretty good at what you do. You're probably almost at capacity or fully booked, and you are still charging the same rates or close to the same rates that you were charging when you first started. And we see this commonly with people when they join successful, they're like, I'm ready to ramp up my income. You know, they might be making 10, 15, 20k months, but they're really at capacity at that point and they can't jump ahead any further. And it usually comes down to a pricing model structure issue. So if at that point, if you have a lot of demand and you are coming to capacity, you're probably chronically undercharging. Okay. The second one is to overcharge without the reps. This is probably more common.

Way more common.

Way more common to see this is that when entrepreneurs get into business, the first thing they go and do which is perfect is market research. They have a look at all their competitors, what everyone's charging, which is the right thing to do. It's really good to go and have a look at, you know, where your pricing is going to sit in comparison to what else is on the market, because we know for sure that your clients going to be doing that. Okay. But what I will say is that more often than not, we see entrepreneurs come into, let's say, the coaching field and they'll just charge what other coaches are charging without realizing that those coaches didn't start by charging that number and that if you don't have the reps, and what we mean by the reps is that you might be really good at what you do, but if no one knows who you are, if you haven't got a really warm network to sell to initially, if you haven't got a huge referral partner lined up, then you probably need to start with a lower pricing model while you build testimonials, proof and get feedback from people that you actually could at what you do. Because once you start changing, changing a handful of lives, you're going to get referrals, you know, up the wazoo and that's going to be amazing for you. Up the wazoo?

Up the wazoo am I?

You're going to get so many referrals and you know, people are going to be banged down your door to work with you, but you can't get that unless you actually have the chance to work with people. And we see too many people come in the market charging, you know, in line with or above what other people are charging, going, oh, well, it's my worth and I want to make sure I'm making money from the beginning. And it's like, yeah, but if no one gets to experience you, if no one buys at that price point, you end up with zero and it's really, really toxic for their person's energy. What would say?

Yeah, there's a couple of sides to this. So when I first started in fitness coaching, I did $1 PT sessions. So it wasn't about the money for me, it was about getting the reps. And I think that's an important distinction to make here with the overcharging thing. And then the other one is people have a need to make money quickly a lot of the time when they come into business. And this also gets very dangerous because if you have a need and you like have a desire and eventually that turns into a desperate energy. If I need to make 50, 60, 70, 80, 100, $200 an hour to make this viable for me and my family's gon go hungry and we're going to be homeless and we're going to end up on the street, it's not a good energy to be in because people and prospects can feel that. So, you know, when people start business or they get into business, we recommend they come into from a safe financial position, therefore they don't need to overcharge, therefore they can get runs on the board, therefore they don't get deflated when things don't go well. The last thing you want to do is get into a market, have a price that's the same as everyone else, and you're competing against people that have been in this 15 years and you're getting destroyed and you're getting nothing because you have no reps, you have no, like, you have no trust. And I can see how that comes off aggressively.

That's true.

Yeah, but like the last thing you want in business is just to get crushed by someone that's been doing it 15 years longer than you and you charge the same as them.

One thing that we say, I think we've maybe had this discussion on the podcast before, but you know, we see people coming to the market at, let's say, a higher price point than their competitors are in line with their competitors and what happens is they struggle. They might get one or two sales, but then they struggle to get any more sales after that. And they start to create belief systems and new in businesses already scary when you first started business is already so much doubt and imposter syndrome. And you know, you're developing so many skills, you have no frickin idea what you're doing. And then you're barely getting any clients. And so you start to make that mean something about you, which is really normal. It's a really normal experience. And what happens is that you spend six months trying to charge these prices, three to six months, and no one's buying and you hardly any sales of the door and your confidence is, you know, through the floor and you feel like crap and you're starting to wonder, is it even worth it? Maybe I should just go get a job again. And. And it starts to get really desperate and really like, gross. You start to get angry at the world and then eventually you meet someone like myself and Tim who'll be like, look, just drop your prices, get some people through the door and just do what you actually got into business to do, which was, I hope to help people. And so then you'll meet someone like Tim and I and we'll say that then you'll get a heap of clients through the door and then within three to six months, you're able to increase the prices to where you wanted to be at the first place. The problem is that's taking you 12 months now to get there and you could have done it in three to six if you just started with a lower price point and gone up. Okay, so the paradox here is they think that they'll make more money faster by charging higher prices prices when you have no reps, but it Takes you a hell of a lot longer to get off the ground at the beginning. It's really, really slow, and it's incredibly painful.

And if you're an established business, you've been doing this a while and you have the supply and demand economics, which we'll go through in the next question. Correct. You know, you should be at least increasing your prices. You know, I'm just going to throw out a number here by like 5% a year at least. Okay. Sometimes more. If you're upskilling, if you're getting amazing results, if you have a guarantee, if everything works, if you do what you say you're going to do, if it does what it says on the box, then you should be increasing your prices over time with the caveat that you have to have the demand to do that. Okay. So there has to be a constant stream of people coming into your business. I say business is 80% marketing. Steph, would you agree?

Yeah, yeah.

If you have that piece dialed in and you are getting results, then prices should be increasing. If you do not have the demand, maybe the product needs work.

Oh, so perfect. Thank you for saying that. So you have a saying that, you know, we speak about a lot. It's not about what you want to charge, it's about what the market will pay. Yeah, I'd love for you to talk us through that concept.

Yeah, let's. Let's zoom out a little bit. Let's go a big picture here. Let's talk about supply and demand on, like an economic scale. So if we look at like petrol prices, so petrol or gas or oil or whatever it is, the oil price is set by the demand. Okay? So there's more demand, there's more people in the world, therefore they can charge more. And what they do with the supply is they shorten the supply. So in the Middle east, in the Saudi Arabian countries, they shorten the supply so the price goes up, so they have high demand and then they can increase their prices. Okay. And this creates, obviously, you know, pricing issues and then, you know, the add in the scarcity. Who knows if this is even true, that oil is running out? Okay. No one's actually got any factual detail on that. So in the head of the consumer, we're like, oil is running out, the prices are going up. This all makes sense. But who knows if that's actually reality? But back to small business example here. If we have a massive amount of supply and we have no demand, that means your price is going to be really low. Okay? So the market is not going to pay for it. So if you go out there, chart, you know, $1,000 or $10,000 for a one on one or a service, and they can basically get anywhere else for a fraction of the price. Obviously they're going to go somewhere else for the fraction of the price because that product is tangible. Okay. So that can be replaced with something else. So you need to really question your market, your ideal client, your audience, your prospect on if they want it and how much they're willing to pay for it before you go into the market trying to charge something. And this kind of leads into everything we've been discussing in this topic so far. It' essentially what you want them to pay, it's what they're willing to pay for it.

I want to talk about something really quickly and this is a bit of a, bit of a private one, but I think it's really cool to discuss. When you sold your gym, and we talked about selling a gym for quite some time before we sold it, like years. And when we first started having the conversation around selling the gym, you know, there was what we thought it was worth because of our ego and what we wanted it to be worth. And you know, even actually probably even when I sold my first business was probably another really good example. It's like because you put so much blood, sweat and tears into it, you're like, oh, surely it's going to be worth this much. But the reality is it's only worth what someone's going to pay for it. And we walked away with a great deal on the gym, but we had a lot of deals fall through because we went in at a higher price point than people were willing to pay. It wasn't about whether we thought it was worth it, it was about what the market would actually pay. So yeah, Tim and I would have loved to walk away being like, you know, of course the gym's worth a million dollars. Like, of course it would have been great to have a seven figure payday on that. Of course we think that the brand and the energy and the blood and the SW and the tears that we put into it was worth that. But that doesn't mean that's what somebody on the other end is going to say. And so that really circles back to that whole point of like, you can be so bought in on your own pricing, but that doesn't mean that it's worth that.

Yeah, I had someone reach out to me this week and they said, here's a gym I want to buy. Like, what do you think of the Deal. And the deal said equity was worth 600k. And I was like, equity was 600k in a gym. I disagree. And he was actually going to pay the amount that, that they asked for it because he said, they said the equity, the blood, sweat and tears, was worth 600k in the business. And I said, no, equity in a gym is worth 600k. Like you're crazy if you're going to buy that. So it's all up to the individual. Some people do believe it. I obviously called bullshit on it and I said, don't do that deal. Let's go back and renegotiate. And I probably saved him 600 grand and a lot of heartache on that. So.

Yeah, yeah. Okay, so talk us through because we've spoken a little bit about market research and I do think it's really important to do market research when it comes to price pricing. So, you know, we've spoken about the fact that one, you should know what your competitors are charging. You should know what the landscape looks like for charging in your niche. Two, we've mentioned a little bit about it's worth what someone will pay. So can you talk us through the Van Westendorp pricing model and your thoughts on how that works?

You nailed the name.

Oh, my God.

Yeah. So essentially there's an economist and I'm going to say he's from Holland, I'm going to say Dutch here on the research that I did. Van Wessenthorpe.

Is it just because his name is Van Western?

Yeah, someone can quote me on that. Essentially there are four questions that you would ask prospects. So if you're going to ask this, you want to ask 10 or 20 ideal clients, okay. Not randoms on the street because they're not going to be interested in what you do. So essentially you're going to show them your offer. So your offer is you get X, X, X. Here's the outcome, this is what you do. Here's the result you're going to get. Here's the guarantee. Xyz. And then you say, at what price would this be way too expensive? That's the first question. At what price would this be kind of expensive but doable? At what price would this be a bargain? And what price would this be too cheap that you would think it sucks? So you get these four an this and you're going to ask this to 10 to 20 people and then you're going to average it. And this is my BRO method of working out the Van Westall pricing model. So he's got a calculator on it, and it's super complex. So I basically average it. And then we're going to find out what the middle price is on this. Then you've got plus 20% and minus 20% and that's going to be your range that you know that your target market or ideal clients would charge. If it were me, I'd probably go in the middle just to be like, average. Cool. So that's average for most people. So if someone thinks it's too cheap, they could probably justify it. If someone thinks it's too expensive, they're probably like, this is going to be a fucking bargain. But the issue, issue with this, Steph, and we did discuss this before we released this in success school recently in our upgrades on compound marketing, was that a lot of people's cost of delivery is more expensive than what they should be charging according to the Van west or pricing model.

Yes.

And if you do this exercise and it comes back that, you know, you basically, it's not profitable for you to run a service at that price, what would you do, Steph?

Yeah, don't run at that price. You have to change something.

Yeah.

So there's two places here where this goes wrong. So what we've just discussed there, which is like, oftentimes especially small business owners, but I'm going to go even deeper and say, especially female small business owners specifically, massively over deliver. Yeah, massively over deliver. We have like, culturally, there's worthiness, there's like not feeling good enough, there's wanting to prove ourselves. There's all these things that culturally are tied in to, you know, over delivering people pleasing, my God. And so, you know, when we looked at, you know, this pricing model, the problem is that most female entrepreneurs that we work with, we end up being like, take that out, take that out, out, take that out, take that out. If you want to include those things, you got to charge a premium price point, like maybe have a layered price or a tiered price point where, you know, this is the main inclusions and then you can upgrade to these things. But most female entrepreneurs will include everything for this one lump sum. But then the cost of actually delivering that outcome means that they never ever make any profit, they never, ever have any money in the bank. And they always feel like they're getting ridden by clients and, you know, they're overworked, they're underpaid. And this is, is, this is a constant thing that happens in small business ownership. So if you have this offer and you do the Van Westen Talk pricing model and you go out to, you know, 10 ideal clients and you find the average, you need to then make sure the delivery cost fits within that price bracket. Which means you might have to take some things out or which means you might have to outsource some stuff to, you know, the Philippines or to a va. It means you might have to simplify some of your systems. It might mean that you have to look at including AI it might mean that you have to look at a smarter way of working and that's okay. It doesn't mean you throw the baby out with the bathwater. We just look at. Can this be simplified to fit into this pricing so that I can still deliver this outcome but without spending so damn much money and time to actually make that happen? Is that right?

Yeah, 100%. I just want to give you an example on like small versus medium sized business on this. So if your ideal client, and let's say you're a social media manager and you go to 10 small businesses that earn under 100k and you say, hey, I'm going to get you 10 leads a month and how much would that be of value to you? And they all come in around the $500 mark. You could run that exact same experiment with a business that makes a million dollars and then they're going to say, yeah, I'd pay three to five grand a month for that. Okay, but the business that you picked or the niche you picked is going to dictate how much money you could charge. Okay. So just because the answers come back and they might say something negative or not in line with what you do, maybe it's just a product market fit or the niche that you are picking or working with, that's that don't value your service in the same way that someone would if they are earning or making a lot of money in their business.

And we see a lot of small business owners go for the smaller markets. We see a lot of small business owners go for small markets like that. I want to help startups and I want to help, you know, stay at home moms and, and that's okay. That's amazing that you want to help those people. That's awesome. But most of the time it's not just that you want to help those people, is that you feel safe helping those people. And the problem with that is that most of those people, oftentimes those markets, especially in today's economy, they don't have the income to pay you. And so you're left in this place where you really want to help people, but you also really need to get paid. And so it becomes this really toxic energy that happens. And eventually you ended up shifting markets anyway because at the end of the day, you have to feed your family. And that's most important first. Right? So, yeah, I think a lot of people play in the, we call it the kiddies pool. A lot of people play in the kiddies pool because it feels safer to play there. But I can tell you right now, you're losing so much money on the table by playing in the kiddies pool. And rather than going into the big, you know, medium sized businesses that have the money that will value you, that will be super grateful for the work that you put in, where you will have really huge meaning and impact into that company, into their mission, into this world as well. And so I highly recommend that there's one other mistake that entrepreneurs often make in this little space is that they will go to market and ask in Facebook groups, you know, what would you pay? They just ask one question, what would you pay for this service?

Oh, God.

And you might even give a range like 500, 700,000, 1500. The problem is that everyone's going to choose this. They're going to choose the lowest two like, and so you never really know. And that's where the Van Westen door pricing model comes in. So great, because you're telling them, at what price point would this be too expensive? They're actually having to tell you the number rather than you give them the number and they pick. Because if you give them a number to pick from, they're always going to pick the lowest ones, guys. They're always going to be the lowest ones.

All right, let's wrap this in the barn. Steph. So everything we've discussed today, how do you know it's time to increase your prices?

Yeah, Tim spoke about it really early. When you have demand, if you do not have demand, that's not to say that you're, you haven't nailed your pricing model for most. More often than not, it's gonna be when you have demand. Sometimes you came out the gate and you just mess up the pricing model from the very beginning and you know you can't afford to charge more. But realistically, if people aren't buying at a cheaper price point, it's probably a wrong product market fit and you actually really need to look at the offer again and the marketing again. Or when you have demand, that's when you should be increasing pricing. Like, we just increased our prices recently and it was because we had extreme amounts of demand and we were at, you know, getting to capacity with success school. And we were like, it's time. It's time to make a change with our pricing model due to demand. So not just because we felt like it, not just because we thought it would.

We thought we were worth more.

Yeah. Not because we had some worthiness attached to it. Not because people were telling us all the time that we should increase our prices, which they were. But because it was time. It was time we had enough demand. Yeah. Last but not least, Tim, to wrap this up really quickly, something that all of our accountant friends and bookkeeper friends that are in our program and in our world will love me to ask. How do you make sure that you charge to make profit?

Yeah. So Steph did touch on this a few times. Like, I want you to look at your service and ask yourself, does it get the outcome that it says it's going to get? If not, how do you get the outcome? And then how do you get that outcome as cheap as possible? So what do you need to take away from your service to make it more profitable? Okay, sometimes this could be in hours of stuff. There could be process changes, could be 80, 20, it could be a bunch of stuff. Once you have that and you know how much it costs you to deliver a service or a product or whatever it is, then we want to think about the profit margin on it. For me, just as like it depends on every single nation, products are way less, services are higher, coaching is even higher. So it just depends on your niche. But, but generally I like to shoot from anywhere from 30 to 60% on a niche. Obviously, the more profit the better and the more you've got to play with. That profit number is just on that service or coaching or whatever it is that doesn't account for the whole business. So the whole business is going to be less because you're wearing other costs within that price. So you've got rent, you've got software, you've got all this other stuff that the pricing or the outgoings doesn't actually affect this service, but it does on the total profit margin of that. So if you have a bigger profit margin on your product or service or coaching, then it's going to be, you know, more justifiable or easier over the long term for your business.

I think, guys, as long as you have actually run the numbers, like picking numbers from heart is not a good way to price your products. Picking numbers that, you know, you really have to factor in how much does it actually cost me to deliver this. And then, you know, the number one problem that we see with profitability is that people think that no one else can be them and so they don't want to outsource their work to anybody else. That is just the fastest way to run a low profit business.

My biggest takeaway, guys, is use the Van Westall pricing model, check it out, do some market research, find out where your target market is at. Steph, the fun part, give us your personal update.

So mine's not that fun, but it is really big for me and I actually said to Tim, I was like, I'm not sure if I should share this because it is really personal, but that's what a personal update is, I guess. My dad is 79 and he's been battling with dementia for a couple of years now and it's just been getting progressively worse as dementia does get. And while that may seem like a sad story, some really beautiful and great news is that we just found him the most perfect aged care facility which is only seven minutes around the corner from where we live and.

But he's fighting people.

He, he did have, he had a fight on date, on night, on night.

Two 79 year old fisticuffs.

He did tell someone to go get fucked, but as you know, the fire runs in the family, so. But at the end of the day like he's really happy there and it was a really big shift for me and for my mum who's been caring for him for a long time and even though it's not a fun update, it's a really, it's a happy personal update for us because he is, other than fighting his fellow inmates, he is really happy there and it is really beautiful and like I said, it's just around the corner which makes it so, so easy to visit and we're so, so grateful for the support that we've had in finding that beautiful place. And if you guys ever need a referral, if you ever have someone that you need getting into aged care, I have a really beautiful referral. Her name is Letty and she helped me find the placement really quickly, so did all the paperwork and everything. For us it was just such a game changer. So I'm feeling super happy about that. What about you?

Yeah, shout out to Letty. Letty, can you send us a video of Bob fighting someone with cane or a walking stick or chair or whatever? That'd be incredible.

I wish there would be footage. I would love to see see it. He did.

It wasn't throwing Fingers.

It wasn't. It wasn't physical, but, yeah, it was verbal.

He would go physical if he could.

He would.

Yeah. My personal update, My big girl has landed. You know, that's very mysterious. But the big girl being my Ram 2500 or our Ram 2500. Steph was not as excited as me about getting another woman in the family. I don't know why I've.

We have a lot of women here.

A lot of women.

Just you and little Felix.

Yeah, true. Just. We're just fighting the good fight.

Yeah.

Little Felix and little Tim. So anyway, we got our new toy hauler, I'll call it. So we're doing Tasmania in January. So we're going to be on the road doing some podcasts from little New Zealand, basically. So we're here. So we're driving from Perth to Melbourne and then taking the ferry with our ridiculously big car and caravan over with the dogs. So we're going to be on the the road for about a month, which is super exciting. The lesson here. We always like to wrap this up in a lesson as Steph has been trying to out lesson me is buy right the first time. So this is my third ram and this is the biggest one. And I just should have got this at the start because it would have solved and you wanted. And I wanted it from the start. And I've wasted probably so much money in taxes, buying three separate cars, stamp duty, gst, all the other, that I should have just got it the first time. It would have been cheaper for us. Give us your lesson.

Okay, so my lesson, I have two lessons about my dad. One is when you do the hard thing, life gets easier. So this has been something we've been putting off so good.

I quit.

Guys, tell me how much better my lessons are. No, because when you like we pull.

It on the dad strings.

Yeah. So good. So. No, because when. For the last few years I've been. Tim has been like, we need to get him into a facility. And I've been like, really reluctant to do it. And it's. It's honestly created more and more pain in our life over. Over the years as it's gone on, as he's gotten worse and it's been harder to deal with as he. He's put more pressure on mum. And it should have been something that we should have done a long time ago, but it felt too hard to do. But obviously when you do what's hard, life gets easier. And life is immediately easier now. And I sleep better at night knowing the dad's in there. And the second thing is, don't hesitate to get support. Like, we hired Letty, who helped us to make the process a lot smoother. And I think that sometimes we can think that we need to do it all on our own in all areas of life. And, yeah, don't hesitate to get the support you need.

Be hesitating.

Don't be hesitating.

All right, guys, as always, if you got some value from the show, share it with someone. Like, subscribe, do all the things. We will see you next week for our first Q A episode.

Yeah. Schooling, schooling.