Promises, promises.
“Price is the representation of your promise.”Ron Baker Just that. What does your price convey to your market?
Killing innovation
Following vanity metrics kills innovation. If you’re following revenue as your key metric, you might be on a sketchy path. This might be obvious: higher margins would let you get a healthier business. High vs Low Margin One will let you serve your market at your best and focus on how to bring your customers even more value (value = what they do care about). The other, might be so thin that will focus you on how to keep most of it. And this —guaranteed— will default you to a state of…
On revenue and your business.
Yesterday’s message was about revenue will kill your business. That is, if you’re only looking for it as the metric to follow (revenue = vanity metric). Here’s the thing Revenue alone doesn’t dictate or even diagnose if a business is doing good or bad. Profit, on the other side, does. While having multiple revenue streams is a great thing to have, if you don’t keep those on check, all your efforts will make little difference. It’ll be ultimately a race to zero. And the worst is that you can…
Revenue will *kill* your business
Wait, WHAT?! In the long term, revenue can (and will) kill your business. And this is not about the lack of revenue, but of your revenue stream. When left unchecked, you’ll get played by how much money you can be making. However, how much money goes into your business means nothing when your margins are thin. And here’s where pricing comes into play. Pricing is not about growth —or even revenue. It’s about how to maximize the margins to keep the business at its best. This is why pricing…
A rate is not a price
A rate is not a price —even when it kinda feels like it. For it to be payable, you need to multiply it by another variable. Might be hours, minutes, quantity, level of effort, impressions… When you charge based on a rate, it’s based on inputs. And you usually have these (with some sort of precision) at the end of the project. If you want to give it ahead, you need to know exactly what the other variables are. Basing what you charge on your inputs takes into the mix ONLY your side, not your…
Building ladders
If you want to be more accommodating to your customers budgets, you can do so. In a profitable way. You can build offering ladders (a game-changing concept shared by Jonathan Stark) An offering ladder (aka product ladder) is a mix of offerings (products, services) that is progressive both in impact for your customer, as in price. They go from low risk, low trust, low friction to high trust, high impact. The goal of it is to reduce the friction with your prospects, so that it can build trust…
Market-based prices
“Hell, no!” That’s the visceral, automatic reaction I get when hearing “You need to price based on your competitors’ prices”. While it sounds logical, the market can be (usually is) underpriced. There are many reasons to it, yet the most common one is because it takes a model of “What it costs me” + “My ‘desired’ margin”. A cost-plus model. Take this into account: while taking the market as a sanity check, and getting yourself a sense of confidence in what you offer, it also assumes that the…
Adding to the noise
When you’re going into the market and set yourself with what the market pays/charges/”accept”, you’re only adding to the noise. It gives your prospect one more option to choose from. This overwhelms them. Without noticing, they go into the paradox of choice: the more choices you can choose from, the more anxiety and harder it is to choose one option. So, unless your price stands out from the crowd, you won’t differentiate yourself. You’ll get compared on merely numbers. And you do NOT want…
Decisions
Taking more time to think over things and THEN make a decision is just stalling. Sometimes you have all the facts right on your face —yet you close your eyes and want to believe they’re not there. So you stall. Your friendly reminder that “No decision is a decision”. It might be painful. But it’s simple. 🙂
Look for someone
If you’re not having the best time with how your business is doing, look for help. Look for someone who, as painful it is for them, will tell you the things straight up. Someone who’ll call out the bullshit —and call you out to hear what you won’t necessarily like. Yet, something that will be in your best interest. Here’s how you’ll know: they’ll call it out not to sell you anything, but to get your shit together. And it’s painful. I mean, it’s your business. Your own baby. In the long run…