After many years of working with various entrepreneurs and business owners, I’ve found that one common mistake people make (especially the one-man-band business owners) is not pricing their products or services. Most of the time, the pricing they pick is based on the actual cost of materials and the labor time they put into it, with some profit margin added. That’s it.
And so, when I ask that person, “What would you cheerfully pay to get a new customer?” they struggle to come up with a number. Because any cost of acquiring a new customer would lower their profit.
Sounds familiar?
Any pricing model worth its salt has to factor in the ability to find new people. Even if, right now, you get all or most of your clients by word of mouth and for free. But that’s bad business – it means you’re leaving it to chance. It’s not predictable; you can’t scale it, And it gets worse when you want to teach your model to others or license it out to businesses in your industry.
In other words, what you have is something that nobody can replicate.
When somebody new comes into your market, they don’t come into it with your reputation and track record. They don’t have all the testimonials and happy clients that you have. They literally start from scratch. They don’t even show up in Google searches, And if the model you want to license or teach doesn’t have a predictable way of getting clients regardless of reputation and history, you don’t have a scalable system.
So, what you need to do is to look at your current business as somebody coming into a new market. As someone without advantages, focus on building your Before Unit like a predictable vending machine. So that no matter what, whenever you decide you want more business.
You know exactly how much money you’re going to put in and how many new clients you’re going to get on the other end.
For more on creating a sustainable business that is scalable, head on to the podcast.
