what's going on everyone it's alex from here founder and ceo of acquisition.com we have a portfolio of companies uh we work with companies that are between at minimum three to ten million dollars here in revenue and we help them scale and exit in three to five years so that they never have to make another dollar again you should only have to get rich once so that's our saying for everyone else who's below 3 million or 10 million in revenue then i am making all of these trainings for free to hopefully get you to that point so that we can work together and at the very least if you're not there then just enjoy it for free i just want everyone to be wealthy and i mean that genuinely and so the second component so this is uh the second component of creating offers that will that will convert and make you money all right and so this is what helped us you know do 120 120 i think at this point million in sales across lots of entities that we have and so it's charging what it's worth and so my last video talked about finding a starving crowd which you can find at acquisition.com but this one is uh and that's under the the offers training this is obviously offer number two charging what it's worth all right so the offer might not be converting first because you might be in the wrong market but it might also not be converting if you're in the right market because you might be the wrong price all right so this is a really important component of making something make money right if you charge nothing for something then you probably won't make money from it all right and so here's how to pick the right price okay so there's there's a few components to this one is gonna be the price of vale discrepancy so it's understanding how that even works all together the next is gonna be the virtual cycle of pricing which is one of my favorite concepts to break down for people because it was a huge belief breaker for me in my life and then understanding the correlation between pricing and perceived value all right so let's start with the price to value discrepancy okay so i have this uh little graph here and the reason that that this is so important to understand is that whenever you have services or products or anything whatsoever people inherently buy because they believe that what they are getting in value is superior to price right this is this is how people make purchasing decisions right and the thing is is they will continue to buy from you as long as this discrepancy between price and value exists right here's the price here's the value all right and so as long as value stays above the price then they're happy right now here's the thing this is where you you stop getting customers or people you know bought from your once and they don't want to buy from you again is the moment that that value dips below or matches your price then that is the point of cancellation of the point of no return so if you're a recurring revenue business it would be a point of cancellation if you're if you're selling physical products or or one-time services then they they're not going to refer people and they're not going to want to do business with you again right and the thing is is that most businesses believe it or not are actually below this line uh and so they're really only able to make one sale per customer and they can never make another sale again which massively impacts the business that's why most businesses don't make money they always have to find new customers because their existing product isn't that good and i'm going to be really on with you honest with you for a second so many times i talk to business owners and they're like we're so good at what we do we just can't find customers the reality is that you probably aren't that good you're probably mediocre you're probably average and the thing is is that average puts you here or below and in order to get repeat business you can't just be like above average you need to be exceptional you need to be remarkable you need to be so good that people talk about you and that's difficult to do and that's why most people don't make money and that's okay and that's why you're here and you're learning and getting better all right so price to value discrepancy understanding this concept in terms of how much value you need to provide is going to be key to making sure that our pricing works so there's two ways to improve this discrepancy one is you can lower your price right which is a one-way ticket to failure the other way is to increase your value all right which is always the way that when i'm working with a business is what i'm trying to do is i'm trying to figure out ways to increase the value and more importantly the perceived value of the product or services to the customers and prospects so that they're more willing to pay a higher rate and so part of that's going to be niching down part of that's going to be positioning the offer and reversing risk and all that kind of stuff which we're going to get to in some in some of the future videos all right and so like i said number one is you can lower the price number two is you can raise the value which is obviously the one that we want to go to all right so let's go into that alright so that's the hard way and the easy way is to raise the value all right but remember you can only go down to zero but you can go infinitely high the other direction for value which is one of the key points and this is one i remember i was i was eating a burger when i was a kid when i was working at a smoothie shop and one of the co-workers that i had pulled me slightly dude check this out he was reading a magazine because when magazines existed and he was like look this guy bought a 50 000 burger and i was walking in with my burger from next door that i bought for 13 bucks right and he said he paid 50 000 for a burger and i remember thinking to myself i was like how could somebody afford 50 000 for a burger that's crazy and so i asked him like what does this guy do he's like apparently some hedge fund guy some finance guy and he made i can't remember the number was but i think he made like 20 or 30 million dollars in a year which they said in the article and the reason that this was so interesting to me was that i realized that you could go infinitely high in the other direction but you could only go down to zero because for me at the time believe it or not me buying a 13 burger on a 6.75 hour wage was me giving two hours of my life in order to get that amount of money for him at 20 million dollars a year he was making you know whatever it was thousand an hour or whatever the math is right or it might have been he might have made fifty doesn't matter i remember he was making twenty five thousand an hour and so it took him two hours of time to pay for this fifty thousand dollar burger and it took me two hours of time to pay for my 13 burger and so that's when i realized that that purchase was actually equivalent for both of us and so that's what showed me the power of pricing is that my god there are some people who could who could go infinitely high in the other direction but i can only go down to zero right and so that was a huge belief breaking moment for me in understanding price to value discrepancy all right and the goal is that they buy a tremendous amount of value at a discount that is always the goal is that you're selling dollars at a discount all right dollars at a discount that's the idea is we they have to feel like their dollars are going to be the best return on their quote investment of spending their money that they've hard earned is going to be with you because they get so much more per dollar not how many dollars they spend but per dollar they're going to get more than anywhere else all right so price to value discrepancy the goal is to increase the value that's why that's so important all right so number two is the virtuous cycle of price so this is what most people do when they're trying to decide on pricing for their business they look at the marketplace they see what else everyone else is offering they take the average they go slightly below to quote remain competitive they provide whatever their competition offers with quote a little more and end up at a value proposition of more for less this is what you don't want to do this is what everyone does this is why everyone's broke so stop looking at them every one of these competitors that you're looking at is poor so that's the big secret i can tell you having spoken with so many business owners who look a certain way who present a certain way most people are broke all right so don't model them don't copy them do something different do it on your own use your own brain all right so this is what i consider the vicious cycle of price all right because as you do this all you have to do over time is you repeat step five and six you try and provide a little bit more for a little bit less a little bit more a little bit less until eventually you're giving everything for nothing and you can't make money and you wonder why you aren't successful all right the point here is that when you price this way you're pricing for market efficiency all right this is what you know they talk about in in perfect marketplaces and economics is the the pricing for people who are not sophisticated competitors they will continue to do this same process like i just said it's probably to do a little bit more for a little bit less over and over and over again until eventually there's almost no profit left in the business all right and so that green is your profit the red is the overhead because you've been forced into this category of everyone which forces you compete on price which drives you down which means pretty much everyone just goes out of business or stays just barely above water every month just barely keeping themselves above water and wondering when that corner that's going to come is going to and it never does because they can't do it better they have to do it differently so this is what the virtuous cycle of price looks like all right so virtuous versus vista cycle so for for your clients if you decrease the price you decrease their emotional investment you decrease the perceived value of your product you decrease their results because you decrease the price because they're not as invested you increase the demandiness of these clients i'll tell you the people who pay you the least are the ones who are the biggest pain in the butt and the revenue for fulfillment per customer goes down so these are the this is the dangerous side of of the price now the virtuous side is if you increase your price you increase their emotional investment you increase their perceived value of what you do by extension you increase the results you decrease the demandiness of the people that you have and you increase the revenue for fulfillment per customer what i mean by that is that because they pay more you can literally spend more money to give them an exceptional experience and make sure they get the results they want which increase their pursuit value and that is why this is a virtuous cycle this is a circle i probably should draw it as a circle next time i will do that but it's a circle that self-fulfills and it's a flywheel right that's the beauty of virtuous pricing vicious is fly with the wrong direction that's working against you all right but let me show you what this looks like for your business right so for your business if you decrease your price you decrease your profit you decrease the proof your pc value of self you're like man i'm just a low-cost person i'm not i'm not i'm not good i don't believe in myself that's why i have to lower my price you decrease your perception of impact because you're not getting these people results so then you start to question your own validity and your conviction starts to drop you don't feel as confident in your ability to provide services and value because you continue to have to decrease your pricing almost feel like you're trying to give away your services in order to be successful so people don't want to buy them from you because you're not convicted because you on some level already know that you can't provide the level of service because you don't have any margin left over right which goes to the next one which is the service levels right your level of service decreases because you just have less money you can't pay people you can't attract better talent and so it's a vicious cycle downwards and your sales team in and of itself and that might be you or might be your team they start to lose conviction in you and your services because of all the things that i just said right now let's put on the flip side if you can increase your price right you'll increase your profitability right you'll increase your pursuit value yourself you're like hey we're a premium leader we are the best at this which is a category of one your perception of impact will increase you feel like your clients are getting better results from working with you your service levels increase because you have excess money left over to reinvest in talent reinvest in providing exceptional experience and your sales team or you are massively convicted because you know you're changing people's lives and making the impact you always wanted to which is why you started the business begin with and you may have made some of these mistakes at this point but that's okay because you can always change because that's the beauty of being our own bosses we can always make the decisions all right so that is the virtual cycle of price and hopefully while i'm selling you right now on increasing pricing but i'm going to give you one more real one of showing you why it's worth why you should charge what it's worth all right and it's that price in and of itself is a communication of value think about it i'm going to give you a little a little example here so this was a taste test i'll cite the study somewhere but for right now this was a blind taste test that was done on three wines okay and so they presented the tasters with a low priced wine a medium priced wine and an expensive one all right so they could see the price on the bottles right in front of them they tasted them and they asked people to rate them in you know good better best right and so they said the the low price one unsurprisingly was not as good they said the medium one was medium and they said the higher price one was great all right fairly standard and a lot of us kind of come to that association you know good wines are more expensive and that's why they're that's why they're good that's why they're more expensive right but here's what's interesting all of those wines were actually the exact same wine just put in different bottles with different price tags on them and so here's why this is so important people literally perceived more value from the same product because the price was higher so that means that you don't just charge higher prices because your product is better charging higher prices also makes your product better think about that for a second now if you are the wine business owner of this this particular bottle and you had a way of doing one thing that made you more money and increase the perception of your of your clients believing that what you had was better would you do it of course right why would you not get the the better result for your client right why would you want to sell the the bad wine when you could sell the great one right and it's the same exact wine why would you not do that of course you would you didn't do it because you probably were afraid of what would happen but i'm telling you having done this with so many businesses if you can increase the price you'll increase the perception of value and people like it more warren buffett he took over cease candies you know 30 40 years ago whatever it was he since made a billion dollars from this purchase that he bought for 24 million all right a billion dollars in net free cash flow it's money that he took out of the business after reinvesting and every single year what they've done is they've raised the prices at a higher rate than inflation and so they've raised it by five six percent every single year they raised the price and they found out that chocolates were actually fairly inelastic as in people would be willing to pay 40 50 60 for a box of chocolates right and when they started with them they were you know not even close to that but by doing this they raised their profit they raised the perceived quality of their product and they did all of that simply by changing a number how awesome is that that's the beauty of the virtuous cycle of price all right so the goal is to be so much more expensive that a consumer must pause and think this cannot be the same category as solution as everyone else's thereby making you a category of one this is how i always like to think about it if you can make your price so much disconnected from the marketplace not just not just a little bit more expensive but significantly more expensive than the rest of the marketplace then they have to pause so when i started jim lunch which was my first company when i came into the marketplace the most expensive competitor was priced at five thousand dollars and i thought to myself well i don't want to just be a little bit more expensive i want to be way more expensive and so our product the minimum thing that someone could buy from us was sixteen thousand dollars and the next thing someone buy from us was 126 thousand dollars right it was so far outside of what everyone else was doing that they were like my god like this has to be something different it must be something different because it has to be because it's priced so differently and so your price communicates so much about your business and the value you're going to provide that it's inextricably linked to the value that you're providing all right which is why in one of our ways of fixing the value is actually looking at the price and making sure that we're charging what it's worth so that we can provide the results in a meaningful way to our prospects because obviously all that extra money that i was able to have compared to my competitors they had five thousand dollars and had to make a margin from that i had sixteen thousand dollars i could reinvest five thousand dollars right off the top into making unbelievable experience i could invest the entire cost of their program into making someone's experience better and as a result our clients got better results their perceived value was higher we had more referrals etc etc and that was the virtuous cycle in action okay and so note if you have something where a client must perform options or some action excuse me in order to be successful then it would follow the more invested they are the more invested they will be all right which in turn will create better students and better outcomes so ethically if you want to say that you're helping someone the most you possibly can then you have to ethically get them emotionally invested in the outcome especially if you're doing a do it yourself or done with you type of service where they have to do something you have to increase their emotional investment in order for them to get the result all right and so increasing the quality of your prospects increases the quality of your product think about that for a second you can literally increase the quality of your product because the level and the number of customers who are successful by increasing the quality of your prospects which you can do by raising your price which is a bar a barrier to entry for people to come in and so that way you get only the best people you have more money to invest in them and then they get they have a higher perceived value they don't price compared to anyone else because you're so far outside of their range and you can do things that no one else can do because you have more margin than everyone else has and that's how you create a winning combo all right and so that includes how to charge what it's worth and and so in the next video which you can find at acquisition.com this is in the offers training i have all of these courses and modules for you there they're absolutely free my goal is for anyone who's below 3 million a year to just use my stuff and make the money like absolutely take it go make your 3 million plus and hopefully you know once you cross three or five million you know give us a call and we'd love to help you get to 30 plus and exit so you only have to get rich once so keeping awesome we'll see you on the flip side bye