1. Charge More
I have noticed in both consulting and in the products business that better clients and customers always pay more. They’re typically more friendly, require less maintenance, and are more likely to be satisfied customers, funnily enough.
The ones that pay less will expect more.
If you provide consulting services, then you probably know what I mean. The guy who’s paying $500 a month for internet marketing/development services will be calling you all of the time, checking in for results, coming into your office to complain about your fee and then asking you to do more for less… They expect you to give them the world… They ultimately end up being a drain on your time and resources. If you have a lot of clients in this category, I feel for you. You can start “firing” your bottom 10% of clients and start accepting new clients more selectively. Say no more.
This doesn’t just apply to consulting. It’s the same with products. The lower your pricing point, the more likely you’ll have complaining customers.
You’ll see this everywhere. From Apps to Books to Software.
I remember downloading this Stripe App for my iPhone. The average review was 2 stars at the time out of 7 reviews. It made me a bit hesitant at first. But I decided to pay the $7.99 and it turned out to be an amazing app which I love using. For that price, I can charge clients on the go with the app, check details of existing transactions, see graphs of weekly revenue, monthly revenue as well as cumulative revenue. And it also gives PayPal style payment received notifications on the phone.
But you’ll always get complaining customers, especially at the lower pricing point.
No search makes this app completely useless? And a refund?
That’s not to say that higher paying customers are always going to be easier to deal with. You’re going to get difficult customers at both sides of the spectrum. But the probabilities change wildly.
A lot of people do tend to undervalue their own products and services, and are always surprised by the positive results they get when they double their prices.
You set the prices.
2. Choose Easy Battles
Joe Polish has always said that you should choose something that’s easy, lucrative and fun (ELF). He was originally running a cleaning company which turned out to actually lose money each time he took on a cleaning job. He became so good at marketing that he actually lost a lot of money because of all the cleaning gigs he got, and had a miserable time cleaning. Eventually, he started a program to teach other cleaners how to successfully market their business.
I started off trying to create a career board just for university graduates in Australia while I was 19 years old and studying in Sydney. I got almost 6,000 students registered on the website ready to find graduate jobs (they were typically penultimate, about to graduate or recently graduated).
The problem was that I couldn’t get employers to come on board. I cold-called some and the usual reply would be, “Yeah we’re good with Seek [Ed: Australia’s largest job board]”. Then I’d reply with, “But you’re looking for university graduates and this board is designed specifically for recruiting university graduates. We’ve got very distinguished graduates that I think you’d be very interested in.” Which was true. I had a good number of students/graduates that had perfect GPAs, shining resumes, and more, that made great candidates.
This is the problem with two-sided markets. You essentially have double the work — you need to bring together buyers, and then you need to bring sellers also. Or in my case, job seekers and employers. Of course, if you manage to make it work, it can be very lucrative as companies like eBay, AirBNB and Wotif have demonstrated.
I found the experience rather frustrating, having won half the battle, but struggling with the other half.
Had I figured out a business model where I only needed one side of the market (e.g. renting textbooks to students), I think the business would have been a lot more successful.
My next venture thankfully proved a lot more fruitful. I started an eCommerce site (after reading the 4 Hour Workweek) in an area where there was little competition, there was a niche market that wanted the product online which was mostly or only sold physically in stores, margins were about 32% after all costs, and I had the supplier drop ship everything.
I do agree with Brian Fetherstonhaugh (CEO of OgilvyOne) that there are huge opportunities in eCommerce, especially in emerging markets:
If you’re just starting out, look for the “easy swings”. As Warren Buffett has said about investing, “You don’t have to swing at everything—you can wait for your pitch”
So it is with starting a business. If you start your company on the first opportunity you stumble into, you may end up spending several years trying to make the best of a bad situation.
Instead pick your battles. My preferred route is to work from demand, find a pain point, and work backwards to the product. If there’s a burning need or desire, there will be a market.
Here’s a well known excerpt from Gary Halbert:
If you and I both owned a hamburger stand and we were in a contest to see who could sell the most hamburgers, what advantages would you most like to have on your side to help you win?”
The answers vary. Some of the students say they would like to have the advantage of having superior meat from which to make their burgers. Others say they want sesame seed buns. Others mention location. Someone usually wants to be able to offer the lowest prices.
And so on.
Whatever. In any case, after my students are finished telling me what advantages they would most like to have, I usually say to them something like this: “O.K., I’ll give you every single advantage you have asked for. I, myself, only want one advantage and, if you will give it to me, I will (when it comes to selling burgers) whip the pants off all of you!”
“What advantage do you want?” they ask.
“The only advantage I want,” I reply…
A Starving Crowd!”
This isn’t the only way of course. You can also start with your own problems and work from there.
3. Pivot or Persevere?
What I didn’t mention about the job board is that I actually had some (small) success with tech related companies in Sydney. They were the only ones that showed an early interest in the job board and had actually paid to advertise on the job board for java developers, interns, and maybe a designer. But I was also stubbornly fixed on the idea of a graduate jobs board when I should have made a shift to being a tech jobs board for example, and see whether that would have gained traction.
Build – Measure – Learn
But in the end, I decided that it wasn’t going to work out, so I quit, and moved on.
Are you in a similar position at the moment? If so, I would recommend that you read the Lean Startup by Eric Ries if you haven’t done so already. I’m a big fan of the “Lean Startup Movement” and you can get a good and brief PDF on the Lean Methodology. If what you’re doing seems to difficult and it’s not getting any traction, then you’ll need to consider making a structural course correction and test a new fundamental hypothesis about your product, your strategy and how you’re going to grow your business.
A lot of start ups typically don’t end up doing what they originally set out to do. PayPal started out as being payment software or “digital wallets” for Palm Pilots, AirBnB a place to stay for tech conferences. Sometimes, what you’re working on leads to a discovery of something better.
Once you’ve made the decision to build, it’s just as important to measure the feedback and keeping an open mind to learn from it. The quicker you can iterate through the process, the higher the probability that you will build a successful company. If you choose an “easy battle” to begin with, it’ll make this a whole lot easier. You can come up with a barely functioning product and still gain a lot of traction because you’re satisfying a strong need.
4. Continuity Programs
The best businesses typically have recurring revenue embedded in some way in their core business model.
Some not so obvious examples include Wrigley’s, Coca-Cola, Gillette. You chew gum regularly, drink Coke regularly, shave regularly (Dollar Shave Club is another good example).
If you don’t have a continuity program in your business, I would suggest that you look for ways to add one into your business. Look for ways that would add value to your customer that would warrant a monthly subscription.
And if you’re just starting out, I would encourage you to look at opportunities where you’ll be able to incorporate recurring revenue in your business model.
If you’re a speaker/author/consultant/coach, you can have monthly coaching programs which is one on one or group, mastermind programs, member newsletters, membership programs which can be pre-recorded videos, audios, or a combination thereof.
If you’re a developer, obviously a Software as a Service.
The possibilities are limitless. The only constraint is your own imagination (or self-imposed psychological barriers 😉
Thanks for reading!