Pricing Services Correctly Drives Cash Flow
The lifeblood of any business is cash flow.
If you don’t have it and don’t plan for it, you’re out of business before you even begin.
Most entrepreneurs make the mistake of not spending their time and energy generating cash. They’re worried more about generating leads, pageviews, followers, tripwire customers, or other vanity metrics that don’t really pay the bills.
I don’t know about you, but my bank doesn’t take Twitter followers.
That may be fine if this is a side hustle, but for focused entrepreneurs who are trying to build a real business, the best thing you can do is to generate cash as quickly as possible.
It’s a myth that you have to be cheap at the beginning. There is a natural relationship between the pricing of services that you offer and the value you create for your customer. If you don’t believe you’re creating enough value when you are pricing services, why would your customers think differently?
You can’t just snap your fingers and create a high-ticket offer that generates cash. You have to do the work. But if you do the work, you’ll find that you’re able to generate the customers – and cash -you need to keep your business afloat.
There are three fatal assumptions that entrepreneurs make when pricing services. And those assumptions are keeping you broke.
1. “I’m just starting out, and so I don’t have the right to charge a lot of money.”
The reason that this assumption is so bad is because it plays into your scarcity mindset.
Most entrepreneurs have a difficult time asking people to pay premium prices for their services, even when they’re the best at what they do. Believing that you have to build your business big enough to charge high prices is a vicious cycle. You start cash-poor and you’ll never be able to invest in growing your business. And therefore you’ll always be stuck cash poor; and that means you’ll always be charging low prices.
See how this vicious cycle is keeping you broke?
You have to reject this idea that you somehow have to “grow into” charging premium pricing. Just because you’re starting out your business doesn’t mean you’re new at your skill set. You are a high-valued service provider with experience either in corporate or in other job areas even before you started your company. There is no reason why you can’t use that – leverage that experience to start charging premium pricing. It all comes down to having the right value proposition.
2. “It’s easier to sell something cheap; so if I want quick sales, it has to be cheap.”
This assumption is flat out wrong.
In fact there are two problems with this assumption.
First, there is so much low-priced crap in the marketplace that if you are just another cheap service provider, you will not stand out. Don’t stand out and you don’t sell. Period.
Second, as I said before, price and value go hand in hand. In order to sell a high-priced service, you need to be able to generate a life-changing, transformational outcome for your client. Otherwise, why bother investing?
So, turn this assumption around. If you have a high-priced, high-value offer that creates a fundamental transformation for your client, you stand out AND have something of value to sell. Otherwise, you’ll blend in with all the other information marketers peddling their trip-wires and $99 information products. That is a difficult sale, because your customer will be left fundamentally asking the question, “Why should I buy from you?”
But if you find a core need that your prospect wants, and you have a way to deliver it in a transformational way, they absolutely will pay the money.
Not only is the assumption wrong, it’s completely backwards. With a well-crafted, well-positioned high-ticket offer, it’s actually easier to get people to buy.
3. “At the beginning of your business, vanity metrics like number of sales or number of leads are more important.”
This mistake is the one I see most often posted on Facebook, when people show pictures of their PayPal account with dozens of sales for $8 each. They’re excited about the traction that they’re getting, but unless they have a plan to convert those $8 sales into customers that are paying them $10k ,$25k, or even $100k, they’re going to be broke.
Because fundamentally, the flaw here is – give me enough $8 sales and I’ll be able to pay the bills. Wrong.
It’s a little sad actually, but it’s simply a math problem that doesn’t work out. Think about how many sales you would have to execute at $8, in order to pay your bills for the month.
You’re not going to be growing a business with $1000 here or there. You need to be making $10k or $20k a month in order to keep your business going. So how many tripwires is that?
$20k / $8 = 2500 tripwire sales.
Do you know how hard it is to create 2500 customers?
The argument goes, of course, this is not the end of the funnel; there are other things that you need to do to upsell them to your “real” product.
Great. But how much work is that? Because you’re dealing with dozens and maybe even hundreds of customers all at the same time – with all their customer service questions too. That’s so many customers, all at the same time, and trying to get them to upgrade, you have to make investments in automation and technology – NOW!
That’s so early in the process that whatever $8 you just made is gone. Don’t even take into consideration the fact that for most people, the $8 is actually paying for the advertising that got that lead there. You’ve done all the work, but really have no plan to execute on that.
There’s no rule that says that a customer has to go from $0 to $8 to $50 to $500 to $5000. With a compelling offer and a value proposition that’s unmistakably recognizable to your prospect, they will go from zero to ten thousand dollars.
If you break out of these 3 assumptions, you’ll find the pathway to a high-ticket offer. There’s no magic wand that anyone’s going to wave over you that says, “Now it’s time for you to start charging high-ticket for your products and services.” That can happen on Day One, if you put the work in. If you don’t, you’ll be left peddling $8 trip wires and $99 information products to thousands and thousands of people, who find that your business model and your value proposition are just like everybody else’s.
That means one thing only: you’re broke.
So flip it around and challenge the status quo. Build your own high-ticket offering on day one. There’s no reason to wait. Start today.