Big Talk About Small Business
Hosted by Mark Zweig and Eric Howerton. Our Mission is to inspire, empower, and equip entrepreneurs with the knowledge and insights they need to succeed in their ventures. Through engaging conversations with industry experts, seasoned entrepreneurs, and thought leaders, we aim to provide valuable strategies, actionable advice, and real-world experiences that will enable our listeners to navigate the challenges, seize the opportunities, and build thriving businesses.
Big Talk About Small Business
Ep. 65 - Unlocking Profitability: Proven Pricing Strategies
Can a simple beard comparison lead to profound business insights? Join us as we kick off with a playful chat about grooming, which unexpectedly transitions into a discussion on the healing power of friendship and entrepreneurship. Our sessions with Mark have become more than just conversations—they're a lifeline, offering a sense of community and relief akin to therapy. We explore how choosing the right team members, like picking friends, can transform a work environment into a nurturing space filled with positivity and optimism, ultimately driving success.
The journey doesn't stop there. We dive headfirst into the world of disruption and innovation, especially the role of AI in today's rapidly changing business landscape. While embracing these technological advancements, it's crucial to distinguish between genuine innovation and mere negativity disguised as disruption. We share our thoughts on how AI is not just changing industries but creating opportunities for small businesses to become billion-dollar contenders. It's a world ripe with potential, and we discuss how staying proactive in managing mental states plays a pivotal role in fostering a culture that thrives on positivity.
Pricing strategies might sound like a dry topic, but we unravel their critical importance in small business growth with engaging examples. Learn how a pizza buffet's tweak in drink pricing led to a profit boost and why charging by the hour might not be the best route in professional services. We touch on real-world scenarios where technology can backfire if not aligned with pricing strategies. By the end, you'll understand the delicate balance between pricing, value, and customer expectations, and why sometimes, a fixed-price model might just be the game-changer your business needs. Don't forget to connect with us through our website for more insights and to share your questions for future episodes!
all right. Hey, good morning eric, good morning mark. How are you, sir?
Speaker 2:I'm okay for an old fart yeah, yeah, that's good man, you look dapper oh thanks, well, you do too.
Speaker 1:Oh, thank you, you got that good haircut you got the the beard coming back, the winter beard.
Speaker 2:Winter beard. Yeah, you got to do that. Get rid of the little sticity sash.
Speaker 1:Yeah, you know, doesn't it kill you, guys? I mean, I hate to sound like this, oh, God. But I saw some guy on I tell you what I was watching an interview with Al Pacino. Ah, he's awesome, he is, but his beard looks terrible.
Speaker 2:Does it?
Speaker 1:And I said to my wife I'm like I can't believe Al Pacino's got such a wispy beard. I go look at mine. It grows in perfectly consistently.
Speaker 3:It is.
Speaker 1:It's beautiful. She goes trying to compare yourself to Al Pacino, right? And then you stopped talking, didn't you? You got the same consistency, man, yeah, and you know, and the good thing about you, too, is like you don't let it grow down your neck.
Speaker 2:Doesn't that drive you crazy? It's dirty.
Speaker 1:What is it with the young guys that let it grow down their?
Speaker 2:neck like that. Yeah, you're not supposed to do that, man, that's not right, it's not that hard, dude, yeah man, you know I could do it blindfolded yeah. Yeah, it's super fast, super easy and it looks clean. You look tight, look put together. Yeah exactly, but if it's growing down here that's like the, that's when you're in the deer woods or something.
Speaker 1:Yeah, you know, I mean you're out.
Speaker 2:Yeah, I've been out there for a week. Yeah, a man walking out of a river, clean-shaven you know that doesn't make any sense. That isn't right.
Speaker 1:You know, but anyway, so here we are. It's another episode of Big Talk About Small Businesses.
Speaker 2:That's good to be here with you, man, you too brother, you know this, you know this is actually, you know, one of my stress-relieving times of the week. You know, it's funny, like I mean, I don't know about you, but like I'm busy, you know, like on Wednesday I'm like man, crap, I got to do this damn podcast with Mark, I know, but then I, but I gotta drive all the way up here to Rogers. Man, you do have to, you do have to sacrifice your time. It is, it is, and I'm just like two, literally two minutes down the road, you know. But, but, man, when I'm getting, when I'm here, though, man, I'm always happy.
Speaker 1:Yeah, and you know I leave these things and I always feel good.
Speaker 2:Yeah, I think we're just getting crap out of us. Maybe, yeah, emptying out a little bit. It's like going to see your shrink or something, that's right.
Speaker 1:This is counseling for us. Yeah, but it's true. There's like some meetings. I used to. You know, I've been on a lot of boards of companies. Yeah, and whenever I would find myself on one where I'd go to the meeting and then I'd leave and it would take me like three days to recover from the energy that was sucked out of me. Those are the ones I resigned from, and there's some meetings or some people that just basically drain your energy. Yeah, no, that's true. And then there's some that boost it up.
Speaker 2:That's the way I always feel about you. Thanks man, you too, bro. That's the way I always feel about you. Thanks man, you too, bro. Yeah, no, I agree, and I mean I think that the goal here is to have as many meetings that boost you up. You actually have to be really careful about that in entrepreneurship, because you can get drugged down into a lot of crap.
Speaker 1:It's so true. I saw some quote the other day. I can't remember what it was, other than the last sentence was that the the entrepreneur has to be an optimist, okay the most successful people in business are optimists you wouldn't be in it if you weren't no, and so you got to keep your attitude good, because when it goes downhill, man, it hurts.
Speaker 2:It's so important it really is it's so important and I mean I think that that, in all honesty, like I've been kind of, at least on my, I guess, my second ride in entrepreneurship Well, I mean, that's not really true, but whatever phase I'm in right now I get it.
Speaker 1:Well, I'm the same as you. I might say that too, but it's like yeah, there's so many.
Speaker 2:I also forget about the ones that fail, you know.
Speaker 1:Well, there's ones. The thing is, there's ones you like, throw your whole heart and soul into and then there's other ones that are just like you know, I'm going to do that, I'm going to try that. Yeah, and those usually aren't the ones that are the most successful.
Speaker 2:No the ones you really throw yourself into are the ones that have the real Well, yeah, because it takes everything you have you got to be the one that's getting up and getting at it. You know, keeping vision alive. But I mean, what I've been appreciating more lately is like how I hired, and you know, the team, yeah, a long time ago was way, way, way different than what I do now.
Speaker 3:Yeah, I mean literally.
Speaker 2:My number one qualification is I mean, does this person have a good attitude? Is this the kind of person that I want to spend my time with? Literally, it's almost like picking out your friendships, or something.
Speaker 1:I agree with you 100%, and people that want to ignore that are crazy.
Speaker 2:Yeah, that's all I can say I mean we think that it's all about this. You know they have to be smarter. I mean, you know, there's some things. Particular background yeah, yeah, but I mean really you just? I mean, can you tolerate, can you lift each other up?
Speaker 3:Yes.
Speaker 2:And keep the energy going.
Speaker 1:Yeah.
Speaker 2:And I've been on a rampage lately at the office man yeah, dude I I've been like about toxicity and gossip.
Speaker 1:That's like the song. Remember a system of a down?
Speaker 2:Yeah, toxicity of the city. I can't believe you know that song, Dude. That is such cool points for you, bro. Whenever I hear that, that's what I think of Toxic work. Mark freaking Zwang knows toxicity by system of the down. Dude, that's some massive cool points for you, bro.
Speaker 1:I had young daughters. Okay, okay, that's true, and it kept me cool.
Speaker 2:But I mean, my thing lately has been just because I've seen it develop over over time when there's like little bickering, you know there's, there's folks that like one individual within a team can start, can have this opinion about something that was said or something that's being done or not being done, or should be done right, and you can see those people like they're discontent, they're disagreement, yeah Right. And then you know, like a lot of times, like I might have let that go or whatever, let them deal with it, or maybe I didn't even really notice. It was really the biggest problem.
Speaker 2:But then, if you let that happen, though, when you leave the room as the entrepreneur or the business owner, they're going to talk to this next person and then the next person then they're going to go have lunch, yep, and then they're going to talk about that and what it really comes down to and this is what I was trying to articulate to the team is, like folks, that is a human negative characteristic. To be an individual and disagree with something, the skeptic.
Speaker 1:I love the skeptic.
Speaker 2:The skeptic the cynical, skeptic and it's like man, but they don't even realize what they're doing. But I was like you have this negativity. You don't talk to me, the person that can actually give you clarity about the circumstance and why decisions might be being made. No, you're right. And then they talk to other people and then they brood this up and the next thing you know you're dealing with a massive issue and all the energy is sucked out of the company.
Speaker 1:Matt Lewis says that he calls that the meeting after the meeting, Because you've got to watch the meeting after the meeting and whoever's holding that. You need to watch the meeting after the meeting and whoever's holding that you need to.
Speaker 2:you need to work on your on that person yeah, you go grab them, pull them in or whatever.
Speaker 2:Yeah because that it's so true um, but I was like telling them I'm not, I'm wanting to put some of those onus, all the onus, really back on the team. I'm like I have, I have. You know, I've admitted to them like I have a job. I'm like y'all think, and I specifically said this I think if y'all think that I wake up every morning smelling flowers and seeing rainbows, you're absolutely freaking wrong. Like I mean, I have my own negative shit, right? You know, I wake up and I have fears and I have concerns and anxieties and stuff like that, you know, and detriments and dooms. Yeah, I was like my job is to get myself out of the bed, work through that crap. You know, get in here and start making it happen.
Speaker 1:Exactly Right.
Speaker 2:Like, get on the other side, get to the light. You know, and I was like but if you know, if y'all don't do that like, I mean I can't do that for you. Yeah, I can't wake up in the morning and think about, you know 10, 20, you know 100 people that I have to make sure that they're seeing positive light every day.
Speaker 1:You know it's so true, I tell you.
Speaker 2:And I was like can we so relevant? My big stand up speech was can we be that company that doesn't tolerate that negative toxicity and we're so aware individually that we don't bring that to the company on a daily basis? And when you see a peer that's behaving that way that you don't engage with that and you reject that? Can we be that gosh dang company?
Speaker 1:Because that's like the secret freaking sauce man. I'm telling you, it's so true.
Speaker 2:It's the secret sauce.
Speaker 1:You can overcome anything. You can.
Speaker 2:And all a company is is just a group of people working together on the same goal. Who believe yes, believe yeah.
Speaker 1:They got to believe baby. They got to believe man. I know, it's so true. We could talk about this all day, but we're supposed to talk about some other stuff.
Speaker 2:Yes, we are, so do you have anything that you wanted to talk about as it relates to the history of entrepreneurship today? I don't Mark. I failed again, that's all right, there's no problem. Okay, thank you. Thank you for the relief.
Speaker 1:We'll let you off the hook on that.
Speaker 2:Let's see what this is, but we have the Zwei hat we got the Zwei and you're not wearing it today.
Speaker 1:No, I'm not, you didn't wear that one.
Speaker 2:I did see that show, though, and I was like man, I like that hat, you look good in it.
Speaker 1:Thank you, the ZYCAT. Okay, the word for today from the ZYCAT is disruptive. Ooh, I like that. What do you think about that? I love that word. Everybody's a disruptor, though on LinkedIn now. Oh, hell yeah, they're all disruptors.
Speaker 2:Yeah, I've seen a lot of those like these little taglines about who you are and they're disrupting and you can't put the same question in this white hat man. We'll read that again next week, or something what is it again?
Speaker 1:it's disruptive, disruptive.
Speaker 2:You're being disruptive but I mean, yeah, like the, you know, I think that disruptors don't really talk about disrupting, because disrupting is actually a really excellent strategy in business. Yeah, it is. You know what I'm saying. If you can, if you can, you've got to do the go the opposite way sometimes.
Speaker 1:Yeah, you know, you can't just do what everybody else does. That's what I always hate about that term best practices. Best practices implies I'm going to do things like everybody else, yeah. That's not the way to be successful in business?
Speaker 2:No, it's not. It's not. You have to be disruptive, right, yeah? I mean like, especially with today's times, with all the technology advances I mean the AI coming full bore. I mean like you got to. How do you use and leverage all these new tools and be a disruptor in whatever industry you're in? Honestly like not getting on the AI kick, but that's what the AI environment is going to be able to do for a lot of new entrepreneurs. They're going to be able to leverage that technology and disrupt a lot.
Speaker 1:I mean, really it applies to any industry on the planet, yeah well, it's sort of like the Internet, how it gave everybody an advantage that they didn't used to have, like the small guys got access to the worldwide market, basically, yep, it's the same thing with the AI. It's like now you can do stuff that big companies could only do with very little developmental cost.
Speaker 2:Not that I'm any expert in AI, but I mean Well, they're predicting that if you know the disruptors that are leveraging the AI, I mean you can have billion dollar companies with 10 or less employees on team. Yeah it's pretty wild. It is wild and there's going to be a lot of that.
Speaker 1:Yeah, it's pretty wild. It is wild and there's going to be a lot of that. Was it on this show or was it somewhere else, that somebody was talking to us about how they had to negotiate a purchasing agreement with AI? That AI was actually negotiating? Oh, are you serious? No, I didn't.
Speaker 2:It wasn't on this show.
Speaker 1:Yeah, somebody was telling me that recently that they had to negotiate with AI. Wow Okay, that's pretty crazy, isn't that crazy? It is crazy. So the buyer was just completely taken out of the picture.
Speaker 2:Yeah, which is a big job normally, yeah, right.
Speaker 1:Yeah, yeah, anyway, yeah, it is going to be disruptive. I think you know the whole thing with disruption, though I mean it can. The problem is when people think they're being disruptors inside the company and they're the cynics and the naysayers that we were talking about.
Speaker 2:That's a negative side of disruption.
Speaker 1:That's not a good kind of disruption. It's not.
Speaker 2:You know I mean. Here's the reality. If you're disrupting the company, you're really hurting your peers more than you are the folks that are at the top of the company or whatever. In most circumstances you can see that.
Speaker 1:Well, sometimes you've got to be a disruptor, but it's hard to be an internal disruptor and not be perceived as negative and not on the team.
Speaker 2:Yeah, I mean, it really is perceived as negative and not on the team. Yeah, I mean, it really is. Yeah, and it also depends on what you're disrupting and why you're disrupting. Whatever it is that you're disrupting, you know, I mean a lot of times. Folks, if they put that energy towards, how can we have this company and disrupt the industry?
Speaker 1:Yeah, that's what we want. We want to disrupt the industry. We want to disrupt the market. Yeah, we want to disrupt the industry. We want to disrupt the market. Yeah, we want to disrupt our competitors, not disrupt the company. Right.
Speaker 2:I'm glad we figured that out.
Speaker 1:Well, it is true, though you know you got to do things differently. I mean, most of us are working in industries, most small businesses are in mature industries, where there's lots and lots of players.
Speaker 2:Rarely are they the pioneer out there with something all new, right, so you've got to differentiate yourself, yeah, in order to break through the pack, which means you have to disrupt something, you gotta disrupt something, and the cool thing is there's a lot of little things you can disrupt to give you that cutting edge in the business, whether it's customer service, it's actually project management, which would be a fantastic disruptor in a lot of industries, like good communication.
Speaker 1:I don't think it's really understood the way project management is taught and people are trained. I think they go way off course. Yeah, it's not. It's not. It needs to be more on the, as you said, the communication and the human interaction aspects versus PERT charts and CPM, logic networks and full wall schedules Agreed, you know, and that's usually what's emphasized.
Speaker 2:Yeah, and I don't think it's lifted high enough within the organization or it doesn't have the esteem that it needs to have.
Speaker 1:It doesn't, because a lot of companies are classic matrix organizations where there are functional departments and the PM sits outside of that and they have to go to these departments to get their team and the team doesn't report to them permanently. Their real boss is their department head or functional head. Gotcha, yeah, and the PM is just using that talent and that's why they don't have the clout they need.
Speaker 2:So how would you set it up differently then?
Speaker 1:I like having PMs inside the functional areas. And so they at least, whatever is the most primary function of the job is where the PM resides. So at least they have some control over some of the resources on a permanently assigned base.
Speaker 2:So they're basically in that specific department. You have a PM per department. Is what you're saying, right?
Speaker 1:You got PMs in the departments and so if the job takes 60% of whatever this function is, that's where the PM is going to reside. They get the 40 from the other ones. But at least they got some control over some resources, as opposed to really having no control. Yeah, when they sit outside completely yeah.
Speaker 2:Just off on their own, they just ladder up to a head of customer success or something like that. Yes, exactly yeah. I think that's a big organization structure of customer success or something like that. Yes, exactly yeah.
Speaker 1:I think that's a big organization. Structure plays a really big part in that. Most people think it's not important, but it really is. Yeah, but you're right that when you start talking about project management, I think some of the stuff that really makes people great project managers is really pretty simple stuff, yeah.
Speaker 2:Oh, it really is. Yeah, it's just consistency.
Speaker 1:It is. It's consistency of communication, prioritization, documentation of everything, setting the priorities, communicating to everybody. Yeah, yeah, and you know we can talk about that. We should make that a future episode.
Speaker 2:We really should, but I mean on the disruption. I mean like a company can disrupt in any of those little small nuances. So I think that you know what I don't want to hopefully that listeners don't take out of it is that you have to have a business that is specifically dedicated to disrupting an industry. It doesn't necessarily have to be that way. You can go into a mature industry with a very specific thing that you're disrupting, whether it's the customer service or it's the pricing. It could be a lot of different things, but you can disrupt in many ways and you can always disrupt. So once you disrupt that angle, you can go disrupt another angle.
Speaker 1:Exactly, keep the cutting edge, and you probably need to, because one thing isn't going to be enough. No, everybody else will figure that out. So you've got to be constantly disrupting.
Speaker 2:Yep.
Speaker 1:It's really true. Well, one of the things we're going to talk about today, speaking of disruption I don't know what the relevance is to the topic, but maybe there's well, I mean pricing.
Speaker 2:Pricing can be disruptive pricing can be disruptive.
Speaker 1:I think you know I've again, I've seen so many small businesses. My students do these reports every semester on a small business, a consulting project, and if you go back over 20 years, eric, I bet you I've seen well over 1,000 companies okay. And the financials on most of those, and if there is a common theme when it comes to pricing, small businesses don't charge enough.
Speaker 3:Yeah.
Speaker 1:Because what they can do is provide better service than a mega corp. It's true, okay, yep, and they got to get paid for that, yep, they're not going to have the volume, they're not going to have the cost competitiveness, right. They, you know they don't have the resources, but what they do have is the ability to give extra high quality service.
Speaker 3:Yeah.
Speaker 1:And that can command a premium in the price. Absolutely and if you don't have that. Then there's just so many small businesses that are just underpricing what they do.
Speaker 2:You know, and I think that I think part of that might be just the, the lack of realization of how important but also how complex pricing strategy really is Like. And I don't think it's a you know. Know, you set it and then you just kind of forget it and then just keep working, like you're constantly got to be thinking about that, and how do you move it? And I mean what's working right?
Speaker 1:well, sometimes just having a high price actually creates a perception of higher quality, absolutely, but you know, so I've always most of my career not all of it, obviously I worked in the professional service industry. And there, you know, the higher pricing allows you to do a better job you can have better people you can have better marketing, you can have more investment in your systems all that. So the pricing is super, super critical.
Speaker 1:Yeah, the only way you're going to command that is by being specialized and by being perceived as really good right yep but I'll tell you what, coming out of the main and the manufacturing side working in the motorcycle company we I've gotten a whole new education on how elastic some things are yeah, some things now like our bikes, are expensive for what they are right yeah they're at the high end of their category. We can look and see when we have price reductions, the demand goes up significantly, so that business is completely different. It's so much more price sensitive.
Speaker 1:Yeah, then some of the other businesses that I've been a part of. Yeah, that it's a real education for me. I think every industry and company is different in a way.
Speaker 2:Yeah, it feels like that. That has a lot to do with, like, you know, what sector are you in? The B2C market versus the B2B market, right?
Speaker 1:What sector are you in the B2C market?
Speaker 2:versus the. B2b market right, Exactly B2C I think it's a lot more critical. Very price sensitive. Yes, b2b is not as critical. Yep, I think that's a very good point. Within the business, for a service or a product are really looking for more. They recognize, respect and need more of that attention or that service component to it.
Speaker 1:Like are you going to actually do what you say? You're going to do? Yes, because so many other things depend on it Absolutely.
Speaker 2:That's why and they're looking at their job going if I screw this up, if I make a bad procurement decision on this, then this is going to be painful the whole way around and plus I'm going to look like an idiot and it's going to affect my job, whereas on a personal side it's just like, well, I mean, should I spend this and am I going to get in trouble with the spouse or am I going to wreck my finances or whatever it might be? And so you have to be really price sensitive on that, and that's really the most important thing.
Speaker 1:Yes, yes, it is, I think too, like a lot of people don't understand. Like in the manufacturing business, you know, I think we are very, very concerned about our margin, all right, but the fallacy in that is that if you don't have enough volume, you don't spread your overhead out on a per unit basis, and so you're, you're not making the margin.
Speaker 1:You think you are Right? Ok, yeah, Maybe there's a margin on your labor and your raw costs to make your product All right, yeah, that can look great. But if you don't do that enough, you know, if I, if I triple my volume, my overhead goes down by two thirds, my overhead allocation Once I hit break even. I mean, think about that, and so that's that's where having volume can really make a big difference over. Which means, how am I going to drive volume? Well, if it's a B2C business, like you said, that's in a price-sensitive market. I've got to drop my price.
Speaker 3:Yeah.
Speaker 1:It's a complex thing. It is. It's not that simple, but you know, I think back. This is big talk about small business, right yeah, and I've seen so many instances where the price does need to go up. I mean, I'll never forget I had this student who did their project on a pizza buffet restaurant where the owner had two of them and the one of the most profound recommendations of my student was raise all your soft drink prices by 10 cents and you make $26,000 a year more profit. The guy was taking $200,000 a year out, wow, but all he had to do. This student went and said okay, who are your competitors? And it was like four or five other places.
Speaker 1:You know, they're in a major metro area. So they went and checked the soft drink prices of all them and these guys were the lowest they were like $1.89. And they ranged like from a low of like $1.99 to $2.39. And, based on the number of soft drinks they sold over the course of a year, $260,000. God Ten cent increase translates to $26,000. God, 10 cent increase translates to 26,000. That's awesome and nobody's going to say no, I mean a 20 cent increase. My only thought on that is maybe you should have gone 20 cents. Yeah, that's what I'm thinking.
Speaker 2:Then you'd make 52,000 more. Yeah, that's exactly what I was sitting here thinking that one simple thing Are people going to come in there and go $1.89 for my Coke.
Speaker 1:No, God bless.
Speaker 2:You know they're used to that. Or $1.99.
Speaker 1:Last week it was $1.89. Right, they don't know. No, no, okay, they don't know what it costs, that's awesome though, because you took something that was already there.
Speaker 1:I mean, it didn't add any expense to you whatsoever either. That's where I think so many companies like another small business. I used to live in the Dover-Sherborn area of Boston, which is a very, very affluent rural community. It's right 16 miles from Boston Harbor. It's right next to Wellesley, which is one of the W towns in the Boston area. Those are the affluent Dover Sherbourne, super affluent. The average income there 20 years ago was probably $250,000 a year and there was one place in town that you could buy food to go and it was really good.
Speaker 1:This guy had this. This place inside the Sitco station, which was the hub of all activity in Dover Sherbourne. They had a Dunkin' Donuts drive up window on the side. You could get your dry cleaning done there, you could rent your videos there, you bought your gas there and they had this Italian take takeout. And so this guy, they own this and he did okay with it because I saw his numbers. Um, I had a friend of mine who was a local bmw sales guy and he told me how much money this guy was taking out of his business. He'd seen all of his tax returns and and anyway. So he's selling these sandwiches for like $3.50 and these meals for like $6 or $7. All right, and people are frigging lined up. You know, at the end of the day they're coming home, they're tired. Yeah, they don't want to make dinner, they go over. I mean, they get the food there. It's fantastic All right.
Speaker 1:This is not like the hot dogs and the roller kind of place. This is completely separate. It's really freaking good. The line is out the door and I said to this guy dude, you should raise all your prices. You got this rich bunch of customers. There's no way they would complain if your sandwiches went from $3.50 to $4.50. No, yeah, and your meals went up by $2.00, and you would double your freaking income. Yeah, okay, yeah, he's like, I don't want to do that, I want to keep it affordable. Yeah, I'm like, dude, you don't understand your target audience. We're not coming here because it's cheap. We're coming here because it's good and it's the only thing in town and it's convenient. It's convenient. Yeah, exactly. You've got to understand why people are buying what they buy from you and price it accordingly.
Speaker 2:Yeah, very good point, very good point.
Speaker 1:He could have doubled his income. Yeah, I'm not exaggerating, no problem in one year.
Speaker 2:Yeah, and not lost any business. No, people go on. I mean, a lot of times people might be discontented with that change in the immediate, but as long as it's not absurd, right, I mean, they'll get used to it and go on. Then you can raise it again another two years down the road.
Speaker 1:He had a superior product. He was in the right location with the customer base that could afford it. You've your product. He was in the right location with the customer base that could afford it.
Speaker 2:You've got to understand your customers and you've got to understand why people are buying from you, yeah, and to come up with an appropriate pricing strategy and so on that note, like I mean, because one of my questions I was going to ask you is, like for the new entrepreneur that's thinking about starting a business, like where do you even start with pricing, you know? I mean, like, how do you even get to a price level?
Speaker 1:I'm going to start high. I think you need to start higher than you think. You can always go down, but you can't go back up easily. That is very difficult to do, so it's easier to start off high and test demand. I always felt like again going back to my own experience I was going to be expensive and so maybe I'm not working all the time. But when I do work I get paid well for it and the rest of my time I can spend devoted to my actual business to make it better. So we're better able to service these clients as opposed to I work all the time. It's cheap, I'm super busy and I have no time to devote to my business. Yeah, that's the trap that the average small business owner falls into, you know but, again back on pricing and not charging enough.
Speaker 1:So you know, last night my wife was out with some of her friends who just came in town for dinner and I got my 13-year-old daughter and you know I go before she and I are going to go out to dinner. So before I go out I got to feed the critters. Okay, yeah, you know, we got these two giant great Pyrenees which can like, do you really? Oh yeah, one weighs 160 and one 110.
Speaker 2:I mean it. The one is like a. It's like having farm animals in your house.
Speaker 1:Yeah, they huh. They're inside. Oh yeah, oh my, totally inside. If my cleaners don't come every week, there's gonna be like dust bunnies the size of this hat rolling through that house, dude, because of the shedding. But anyway, and then we got one cat. We used to have four, oh god, one time we got one cat.
Speaker 1:So I go to feed the cat and we're out of canned cat food, of course it gets it's got it's dry, but it's gotta have it's canned or it's gonna yell at you all night long. Normally we buy this stuff at walmart neighborhood market. Yeah, in like 24 things at a time. It's dirt cheap, right. I don't know what it costs us. Three bucks, four, or 30, 40 cents a can, basically. Yeah, okay, so I go. Well, let's just go to Ozark Natural Foods. It's convenient.
Speaker 1:You know, hazel and I were driving home. I'm like I got to get some of this food. Yeah, we stop over there, we go in Ozark Natural Foods. You, we stop over there, we go in Ozark Natural Foods. You know what it costs for a can, a small can of cat food at Ozark Natural Foods, the cheapest one's $1.39. I had to hunt for that. The normal ones that are at eye level are $1.99 a can. Dang For a small can, okay, and how can they get that? Yeah, when they can buy it for 30 cents at Walmart. Right, because they understand their market. They're sitting right there in town where truly the most affluent people live, yeah, okay, maybe not the ones that are showing off the most, that live in the suburban 8,000-square-foot drywall palaces, right, these are the people who actually have money, that are living in town in a 3,000 square foot 100-year-old house. Yeah Okay yeah, they know they got the market there. Yeah Okay yeah, they got the location, they got the customer base and they're saying we don't need to give this stuff away.
Speaker 2:No, this is what's. Convenient, they're going to pay. Convenient, they're gonna pay it, and the customer also is the kind that appreciate higher quality type of ingredients they have. Yeah, I don't know whether there's anything better in their food or not well I mean, there apparently is right, yeah and so they're it's not a familiar brand. I'll say that no it's organic, it's natural.
Speaker 2:You know it doesn't have all these other things in it that could be harming their pets. Yeah, I love their pets, but that's also understanding your market Exactly. I mean, like I've been in those places too and you might have a lot of the high-income earners, but you also have a lot of folks that are identifying with that. That may not be making much money at all, but they're investing in that identity, that belief. It's a co-op.
Speaker 1:It supports local businesses, yada yada yada Natural foods.
Speaker 2:Take care of it. Yes, save the planet. I mean that's knowing who your audience is. Yes, you know.
Speaker 1:Yes, and being able to understand and understanding why they buy. Yes, why they come to you, yep, yep.
Speaker 2:So yeah, the complexities, though the pricing, you know and I think we hit on a little bit about adjusting, like you're talking about those stories. But you know, I've, I've, I've also dealt with like pricing strategists in businesses. You know that consult.
Speaker 1:Well, you've dealt on a big high level where you're dealing with like millions and millions of dollars worth of consumer products, right, yeah, yeah, that's just like a completely different level where there's gotta be a lot more science, there's a lot more numbers.
Speaker 2:Yeah, and I think that it's you know. But I think you know one of the things about that is that if you start out, if you have a pricing plan and you're thinking about starting a business, you know, do some competitive analysis, you know what are the competition charging, Then how are you going to disrupt that with your pricing? You can set the same type of pricing maybe, or a little bit higher, but you're offering a little bit higher quality service. You have that angle to it. But then, as you start building that business, you have to be very conscious of how are you moving your pricing, how are you adjusting that based upon the circumstances, because it's not a one-time decision.
Speaker 1:No, that's right, You're right, yes.
Speaker 2:I think that's a very good point, and I think there's macroeconomics that affect it. There's microeconomics that are affecting that. There's the value propositions. I mean all that type of stuff.
Speaker 1:Competition changes in the marketplace.
Speaker 2:Technology changes. Yeah, you know, one of my things on that is like what we're trying to do here and you know the other companies is. You know we've talked about AI a little bit earlier, but you know how do we use technology to keep you know, to be able to do more you know in less time, because in our business everything's about time, and so if we can Any service business.
Speaker 1:that's all you got and if you can.
Speaker 2:But if you can use the tech, if you can get in that vein, then you can actually do more with that and that helps you hold your price. So there's another strategy to it. Right, like if you're 150 an hour versus 150 hours an hour in the market, right, and so you're in line. But other people are having to raise their price because they're not leveraging the efficiencies of technology or processes Right, but you can hold your price and provide the same or better, yeah.
Speaker 1:And then, over time, you're probably going to get even more advantage of it right, absolutely, because you're into the technology earlier and if you continue to invest in it, you're going to always be ahead of the other guy yeah, and then your amount per hour is actually becoming more profitable. Yeah, as long as your pricing schedule is on a fixed price. If you charge by the hour and now you have less hours to charge, that defeats the purpose.
Speaker 2:That's a really good point. I'm a big personally in my experience, I'm a really, really big fan of more project or like project-based pricing. I guess you would say, like, I will do this. I already know the amount of hours it takes me and so I'm going to charge you $500 flat to do this project, execute it correctly and it rewards your efficiency Exactly. Yeah, it challenges us, it makes us where we're at, and then the customer knows what I'm charging. Then you're just aligning the expectations. Yes, I'm also not burdening the team with timesheets all the time.
Speaker 1:I know you know what I'm saying. I come out of the professional service world again, where so many people don't understand that they just charge by hour. Yeah, they're still trying to charge by hour. So every time they invest in technology, it basically actually comes back to bite them in the rear. They become less billable yeah. They make less money yeah, it doesn't make any sense at all. No, that's true, you've got to be on fixed price. It's also burdensome, you're right about that time sheet too, yeah, and.
Speaker 2:I think on the client end it's always this mystery. It's like I'm always worried about how much time are you freaking spending, mark? I know it makes me anxious as the person, the buyer.
Speaker 1:Then you've got to watch over them. Then you see somebody on their job that's not working and they're smoking.
Speaker 2:Yeah exactly and you're chilling and you're pulling up and it's like what the hell? And then in your mind you're like am I really paying? You know there's $150 for this. Then you leave and you're just discontented.
Speaker 3:And then you probably won't use them again.
Speaker 2:It so true. You know, I've had some experience.
Speaker 1:People need to think about this stuff. They really do. They really do so many small business owners. They just follow convention. Yes, it's like. This is the way it was done at the last place I worked, so I'm just going to keep doing the same thing.
Speaker 2:And that comes back to that whole disruption mentality, right? Like I mean, we talked about the construction. It's just an easy one for everybody to kind of get a little bit right. But I mean, you know, if I was in the business I would just be charging project-based fees. You know I'd be like, okay, I'm going to do the job for this, I'm going to get it done right for that. If I can be more efficient in my job, you know, then I'm negotiate my subcontractors to do it. For a certain process I got to let everything's fixed out.
Speaker 3:Yeah.
Speaker 2:And then I'm not sitting here saying, oh, I think it's going to be 30 hours, yeah, oh, by the way, when I sent you the final bill, it was 55 hours. Right, and there's nothing you can do about it.
Speaker 1:And you lose your repeat business. But I was thinking the other day so I had my landscapers out there I don't know, it was maybe a month ago doing the second pass on the leaves. Now we need them for the third pass because they just keep freaking, falling Right. I got this big yard and you don't like having leaves on the ground?
Speaker 2:No, yeah, so you're going to do three passes. It's completely covered right now. I got to have them come back, but there's my pass, so you're going to do three passes, it's completely covered.
Speaker 1:Right now I've got to have him come back, but there's still some up there and Sonia's like no, wait, wait, yeah, but you can't handle that. But anyway, my point is this he charges the guy's a great guy Charges a set price per day for his guys to come and work, okay. But so the last time he was there, I was out there watching him. Well, they got this machine. Yeah, all right, that chops up the leaves. They just shove them into this machine. It chops them up and it blows them into the back of a truck, and it did so. It's very compact that way. Right, they can haul a lot more out, less hauls Using fuel, exactly.
Speaker 1:And he was telling me, and I bought this machine and you know it saves us so much time and everything but all I could think about was that's great for me, yeah, but for you, your hourly or your day rate, it's the same, yeah. Whether it might've taken you two days at 1200 bucks a day, yeah, now you can do it in one day for 1200 bucks. In a way, you cut your own throat. Hmm, how's that okay? How's that why? Because he's not getting paid any more per day, gotcha, he's not getting paid any more per day. My last guys would have charged me. You know they didn't have that machine. They stacked them in the trailer and take like six guys standing in the trailer pushing the leaves down. You see what I mean.
Speaker 2:It's almost like they were rewarded for their inefficiency, and now it's the greater efficiency, because they would take them two days to do the job that these other folks are doing. What?
Speaker 1:they should say is I'll do it for $1,500 now.
Speaker 3:Yeah, okay, yeah, I'll do it for $1,500 now.
Speaker 1:Yeah, Okay, yeah. So now, because I have this machine and the other guy is going to charge you two days it's going to cost $2,400. I can do it one day for $1,500 or $1,800. And then the technology actually rewards me for making this big investment in this truck and this trailer-mounted thing and freaking who knows. I bet you that trailer thing costs at least 50 grand that chops them up and blows it.
Speaker 2:Oh yeah, okay, and you could kill yourself with that process strategy if you're not really careful about that.
Speaker 1:Just like you said yeah, so you just do more work and get paid the same amount of money and you've got the overhead of the equipment. But I think that's not that uncommon.
Speaker 2:No, no, I equipment, but I think that's not that uncommon?
Speaker 1:no, no, I mean that's a sneaky thing.
Speaker 1:That's a really sneaky thing. That's the way early on, when, when the architecture and engineering industry started using cad. Yeah, that was the problem there, because they're charging by the hour, yeah, for this talent. Now we've got this cad that multiplies their effectiveness computer-aided design but we're still getting paid the same thing. But now we're paying a million dollars for our Intergraph CAD system with a VAX and all the. You know what I mean. Yeah, just made less money. That's all we did. Might as well have an army of guys out there drawing ink on linen.
Speaker 1:Yeah yeah, if we had a fixed price strategy, that would have been another matter To start out with. Yeah, yeah no I agree.
Speaker 1:Anyway, the pricing thing it is one of the four Ps of the marketing mix, true, and I think it's ignored by too many companies. They just keep working on promotion, maybe they refine the product, but they're not really thinking about pricing the way they should. Yeah, and I think again, you know, with a lot of small businesses, I always say look at how the consumer product companies do things. They make billions of dollars. There's a lot of science behind what they do. Can you learn from them? You know, like advertising, I always say look at the consumer product companies.
Speaker 3:They know what they're doing.
Speaker 2:They're the best, right yeah.
Speaker 3:They know what they're doing.
Speaker 1:Yep, you know, commercials aren't a minute long any longer because they don't need to be. They can be 15 seconds long. Okay, they know that's better. Yeah, whatever it is, they've refined their packaging design. They've refined their pricing strategies. Follow them, it's true. What can you learn from them? They got armies of scientists working on this stuff.
Speaker 2:They really do. Yeah, people that are like. I've worked with a lot of those folks.
Speaker 1:I know You've had experience with them.
Speaker 2:I mean, they're some of the smartest people that I've ever met Exactly.
Speaker 3:I mean all around Sure.
Speaker 2:All of the companies, yeah, I believe it. Big brands, I guess that you know now you point that out, working with that for the length of time that I have, and then seeing some of the others outside of the CPG realm, or the brands and products, it's just like I mean the inefficiencies, the lack of really investing in research, thought processes, strategy, all that type of stuff, and then action, you know, and then follow-ups. I mean, you know, the thing is when you work with one of those companies, like you've got to be on your A-game, 100% on your A-game.
Speaker 1:There's a lot of money riding on every decision they make. There's a lot of money and the other thing they do well is they experiment. They do they test things out to see if they work. Is they experiment? They do they test things?
Speaker 2:out to see if they work. You know, one thing that I've found that they do excellently well as well is that they Excellently.
Speaker 1:well, I wonder if that's a word as well, excellently as well.
Speaker 3:I said excellently, as well as well, that makes sense.
Speaker 2:It kind of makes sense, right, it kind of makes sense Right. But what they do excellently, mark, is if you do, if you do business with them, they monitor and manage you as the, as the contractor, like with, with superb skill, like they don't let you project management manage their job with you. They project manage your job with them.
Speaker 3:Yeah.
Speaker 2:And I think that that's one of the greatest lessons, right? It's like they will make sure they are holding you accountable to what you said day one, right? And then they're following you through on every single meeting that they have and they're waiting for the recap notes.
Speaker 1:That's tough Dude it is. It's a high standard of performance and management.
Speaker 2:It really is, but it's a great, I mean, it's a great lesson, I mean, and that's what makes them so great though.
Speaker 1:Yeah.
Speaker 2:In all honesty, they're all trained that way, they're all thinking that way.
Speaker 1:Well, all I know is that there's so many opportunities out there. There are. You know, it's just every day I wake up and I'm like holy cow. You know there's some people out there who are super negative. The world's turning to shit, whatever. I don't see it that way man, and then there's other people who are out there and go. You know what All the change, the turmoil, the confusion creates the opportunity.
Speaker 2:It's all opportunity.
Speaker 1:That's the entrepreneurial mindset.
Speaker 2:It is man. That's how entrepreneurs win. That's how they've always won. That's how they'll continue to win. I think that we just have the ability in today's world to hear so many different voices. The voices now are loud and clear. You know about the negative side, or about the worries and the fears, and everybody feeds off that. But that's kind of like going back to what I was telling. My team is like guys, like if we can imagine, if everybody that walks in this door like we've done our own self, you know growth in the, in the light and positivity when you walk in the door and then you bring that to your clientele, I mean it's going to reward you a hundredfold. No kidding a hundredfold.
Speaker 1:Yeah, then you're a positive force for them that you're an energizing. Uh, you know.
Speaker 2:Leader of them, yes, yeah, it's a great thing, man. Yeah, you're right, you don't need that much capital, you just need that much energy and positivity.
Speaker 1:Energy is in a way, capital.
Speaker 2:I think it's more precious. That's what I'm starting to discover you can do a lot when you have a lot of energy, you're right.
Speaker 1:Speaking of energy, we need to end this show. It's all over, unfortunately.
Speaker 2:It's a sad thing, man. We have to end this show we do.
Speaker 1:It's all over, unfortunately Sad thing, man it is. We have to say goodbye until another time. We're always interested in your feedback. Love the questions Listeners. Love the questions Send us questions.
Speaker 2:If there's a topic you want us to talk about, we'd love that.
Speaker 1:Yeah, we're always looking for sponsors. Anybody who has a product or service of value to small businesses reach out to us. We'd love to take a look at it. If we think it's something that's valuable, we'd be glad to promote it. Absolutely, okay, absolutely. We're not going to promote it if we don't think it's valuable. That's true. We don't want to be quoted if we don't think it's valuable. That's true. And we're here to help, and we're here to give guidance and we're here to help you. Keep your heads on straight small business owners.
Speaker 2:Right, because we need help with that you help me keep my head on straight Mark.
Speaker 1:Well, you help me keep mine on straight. Thanks, buddy. All right, everybody. Well, until next week. This has been another episode of Big Talk About Small Business.
Speaker 2:Have a good day you too.
Speaker 3:Thanks for tuning into this episode of Big Talk About Small Business. If you have any questions or ideas for upcoming shows, be sure to head over to our website, wwwbigtalkaboutsmallbusinesscom and click on the Ask the Host button for the chance to have your questions answered on the show. Stay connected with us on LinkedIn at Big Talk about Small Business and be sure to head over to our website to read articles, browse episodes and ask questions about upcoming shows.