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-My name is Clay Clark, and I'm a business mentor, the visionaire and CEO ofT hrive15.com. Today we are joined with mom-preneur Deedra Determan, one of our business mentors, and we're going to learn how to avoid getting stuck in that self-employment trap as you grow your business. Everybody out there who's self-employed has found themselves at one point or another in a trap.
And today we're going to work with Deedra Determan to learn how to avoid that self-employment trap, and how to move beyond that to create a successful business that can actually work without us. If you're a contractor, if you're a baker, if you're a builder, if you're any kind of business owner out there, and you find yourself being a self-employed person where you own a job and not a business, today's episode could be worth millions and millions of dollars to you.
Remember, at thrive15.com we believe that knowledge without application is absolutely meaningless. So as you're watching today's episode, take a moment to ask yourself what can you do to uniquely apply these principles in your own life and business. Otherwise, today's episode will be more meaningless than a Starbucks next to another Starbucks.
We are here with the Deedra Determan, and I have the honor of harassing you here for a while. And Deedra is a very renowned PR marketing consultant. Has clients all over the country. And has started a couple businesses, and subsequently sold those. And has just lot of energy, lot of wealth of knowledge. I'm excited to just try to drain your brain of some great info here. So thank you for--
-Well I'm excited to be here.
-Today we're talking about avoiding the self-employment trap. Always building a business model that is scalable and duplicatable. And so the only reason for building a business, in my mind, is to solve a problem for the customer in a profitable way, so that you can make enough money to achieve your dreams. I'm going to repeat. The only reason for building a business is to solve a problem for customer in a profitable way, so that you can make enough money to achieve your dreams. Being poor because you have a stupid business model is nothing to be proud of.
Example, I've done this. So if you start a business using your big idea, if you start a business, you want to take your big idea and ask yourself. How many transactions will I have to do on an annual basis to hit my goals. So I'm going to real quick draw a dysfunctional business on the board, and then I just want to maybe point out this. And I'm going to pick on a guy that I don't know-- it's based on I guy I know, but we'll just, we're going to call him Greg.
So Greg has this box we'll call his business box. And Greg is a graphic designer. And so what Greg does is Deedra calls and she says, hey, how much are your business cards. And Greg wants to get every deal, so Greg says, well I'll do a business card for you for $25. And you're going, all right, yeah. So then Deedra buys the cards from Greg.
Well then Clay is cheap. I'm cheap. I come in. I say hey friend, do you know of anybody who can build business cards cheap. And you're like, yeah, Greg. So you then, you refer me to Greg. I'm going to Greg now. Then what happens is, is that I'm having a good old time. I'm working with him, and then he charged me $25.
Well then my good buddy, my good buddy, he's pretty intense, my website optimization buddy, Clarence. Clarence comes in, and Clarence says Clay, do you know of anybody that can make cards cheap. And I say, $25. And he says, no, I'm talking about cheap. I say, well I'll see. So Greg says I'll do it for $20. Well now we start telling each other and telling other people. Now we have hundreds of humans all over just going to Greg. And we're like, oh, Greg's the boss. I'm paying $20. These are great.
Now Greg, in here, is working now 80 hours a week. I mean, this guy is not sleeping. He looks like this in the mirror. He's just so tired. He's looking upset. And he's not making any money, because he's only making $20 per card. He's working 80 hours a week. And maybe Greg is only paying himself right now, after paying everybody, he only pays himself $15 an hour. So now our main man, Greg, is making like $1,200 a week. He's not sleeping, and he has built himself a trap.
So let's see if Greg gets our of the trap. So Greg said, Deedra, we're going to have to raise prices. And you wouldn't say this. This is what you'd say. You'd say, I can understand that, and I'm happy for you, Greg. And I'm going to go ahead and pay. So you go ahead and go up to $50 now. You tell me and I'm like, I'm out, Greg. You were Greg's cheap cards. You going to change your look website? What else you going to change on me, Greg? I don't even know you anymore.
And then Clarence, he says I'm peacing out, you know, I'm done. This guys says, no, Greg. Boo, Greg. This guy says boo. People go online and write, Greg has lied about his pricing. So now we're stuck with just Deedra, and we have to redo our whole customer marketing thing.
So what I'm trying to help you do, and what we're trying to help you do, is making sure you don't build this trap where you get stuck inside this business. Because I'm telling you, I've done it. And when you get stuck in that repeat cycle of funk, it's a bad deal.
So today, what we're going to do is we're going to go through and kind of teach people like Greg how to avoid. And I guess we're going to stick on the line of a graphic designer. We'll just kind of focus on the graphic design business. So first off, step one to avoid building the business model that's not scalable and duplicatable is one, you want to do the math. Do the
Are you ready to grow your business?
-If we're doing the math, we have to ask ourselves-- and you have a neat idea on this-- how much money are the customers willing to pay for the item? An example-- Greg, Deedra calls. Beep, beep, boop-- yeah, looking to get some business cards. How do you recommend Greg determines the price?
-I think see what the market will pay. What are your competitors charging? Are you offering a similar product?
-Would you call the competition?
-Yeah! Call the competition. Yes! Call the competition. I would call everybody. Google online. Look and see. Do a competitive analysis of what everyone is charging compared to what you're charging.
-So make sure I'm getting this real quick. You would actually probably bust out one of those SWOT analyses, right? Where you figure out your strengths, your weaknesses, your opportunities, your threats? And you would actually recommend calling the competition to see what they charge?
DEEDRA DETERMAN: I would.
CLAY CLARK: Let's just make this up. Let's pretend that a company in Tulsa says we do them for $400. Some other company does them for $5, and somebody else does them for $1,000. And, by the way, this person you call, it's like hey, this is Eddie's mom! Eddie's mom? Yeah, in card business! Do you want to talk to Eddie? And you're like-- you sound like an angry man! That's the $5 one.
And then you've got this company. Well, they have such a nice office, though. Look at their beautiful office. They're $400. And then this guy, he's the best in the world. How would you price there? How do you?
-A lot of it is trial and error? That's what we do with advertising-- what the market is paying. What is your niche? Can you offer something different? Do you have some uniqueness about your cards? You have 20 years' experience doing graphic design or you use a special paper? Is there something that sets yourself apart? If so, I would charge to that.
CLAY CLARK: So you're going to try to find a differentiator.
-You need a differentiator. Competitive analysis and then differentiator on your product compared to everyone else.
CLAY CLARK: I want to make sure that the word "differentiator" really makes sense to people. "Differentiator," if you look this up, what it means is it's basically how you're different from the competition. How you're different. I'm going to go through some companies so you can point out what a differentiator.
It seems like Chick-fil-A, the differentiator is great service.
DEEDRA DETERMAN: Quality food, great service.
-Quality food. The fun play area. It seems like Starbucks, the differentiator is what? The music?
-I think the ambience there that they've created.
-Ambience. That's a word that I didn't know about 10 years ago. So Southwest Airlines, their thing is there's no charging for bags. So what's your difference-maker, right?
-Maybe the card guy, can he deliver? Does he deliver the cards? Make them and deliver. That's taking it one step further. It's convenient.
-My name's Greg, and I deliver. I deliver, folks! Bam! That's his difference right there. Awesome quality. He delivers. This person charges $1,000, this person charges $5, this person charges $400. Deedra, what should we do?
-It depends on where his experience is compared to them. Did he just start?
CLAY CLARK: He just started.
-Is he just new in the market?
CLAY CLARK: Greg just started.
-Then he needs to be lower than the top guy. He needs to be lower, but he doesn't need to be $20. I always ask my clients-- what does it take for you to get up and get out the door every day? You're getting a babysitter for your kids, you're working-- what does it take for you to do that? What is that number?
CLAY CLARK: What should Greg do right now? What number?
-He needs to double it-- I would say at least. If he's $20 an hour and the next guy's $40, double or triple it. He's going to lose a few, and that's fine. But the new ones that come in, he'll set the precedent. And if he has happy customers, if you're happy at $20, you'll pay $40-- because the alternative is [INAUDIBLE].
CLAY CLARK: So what do we say? Greg charges, now, $100 for the card?
DEEDRA DETERMAN: Yeah. That would be good.
-Greg is charging $100. Greg, congratulations.
-You're making five times more, but still less than the competition.
-You figure out how much the customers are willing to pay. That's the first thing. Then we've got to figure out how many hours does it take to produce these wonderful cards? Here's the trick here-- you mentioned it. You said are you going to pay yourself $20 an hour? We have to ask ourselves how much time does it take to do the work? So Greg, if it takes you, man, six hours to make those cards, you're paying yourself $15 an hour. If you doing it in five hours, that's $20 an hour. We need to ask ourselves. If you're watching this right now, you have to ask yourself that question. How much is the customer willing to pay, and how many hours does it take to produce your product or service?
-Now onto the next one-- is now how many clients can use service in a week? So under Greg's model, if our main man Greg, if every time that you deliver cards for $100 up here-- $100. If every time you do those $100 cards, if it takes you all day-- all day, Greg, to make those sweet cards-- the most you can make in a week would be? Is $600? I mean, you work six days a week, or five?
CLAY CLARK: So Greg, I mean the most you can make right now is $500 if that's what you charge per, so we need to ask ourselves then. So let's just pretend, Deedra, that you were the owner of Greg's. It's this weird deal. You did a hostile takeover. You're now in charge of Greg's, and you knew the most you can make is $500. Real talk-- what would you do?
DEEDRA DETERMAN: to get faster.
CLAY CLARK: Faster. You need to get faster.
-Get faster or hire somebody that he can have that helps that maybe is not making $100 an hour, someone that can help him that has the skills [INAUDIBLE].
-Hopefully I'm helping somebody here, but I met a guy years ago who was chronically under employed, living with the parents, rocking almost 40-- almost 40, living mom and dad. Rough deal-- and I talked to him. He was a very creative guy, and he always like, you know, man? For me, I could do a card. I could pour my heart into it. It's I don't want anything out there with my name on it. I'm like, well, your name's not on it. It's in our company. Well, the thing that I made, unless I just love it. So sometimes it takes me a week to make a card. And I'm going, well you're going to have to either charge $1,000 for every card or go faster. That's it.
-It's hard with creativity. I know. Pump it out.
-I once dealt with a business where the maximum number of products they could make in a week was eight, and they refused to charge more than $500 per item. So it's like, well, then you have to make more or charge more. There's no real-- so this is how it works. This is the brass tacks. So then we go in here, and we say, how many hours does it take to do that? We got into that, and now we're going into the monthly expenses, because, Greg-- you know, Greg, there's expenses. So I'm going to go ahead, and I'm going to kind of make a new slide here. Let's see if I can do it. Little technical difficulty here. We have a middle aged man trying to use a new piece of technology. Thank you.
So here we go. So let's get into the real talk. So Greg now is charging $100 for a card. I'm going to say per project for his graphic design company. That's the most he's-- and now he's sped up things a little bit. So he can do two a day. Two per day. That's going to give our main man Greg total income every day of $200. Cool, except for he does it five days a week. Did you work five days a week when you started 918moms? Are you being real?
DEEDRA DETERMAN: probably worked more than that.
CLAY CLARK: You did. How many hours?
-A lot. A lot in the beginning. If you look up the guy who started Tesla Motors, he basically explains that nothing can be done in 40 hours. It's not possible to start a company. If you read the writings of, like, I don't know, the Bible, it talks about the earth was made Monday, Tuesday, Wednesday, Thursday, Friday, Saturday, and on Sunday they rested, the idea being it took six days. Throwing it out there. Whether you believe in the Bible or Tesla Motors, you need to work. You can't do it in 40 hours. So really he's probably going six days.
-Six in the beginning.
CLAY CLARK: OK, so he's going six. So Greg, congratulations. [INAUDIBLE], Greg. $1,200 is the total amount of money coming in. So now we get into this next part here. This is the money coming in. We'll call this income, and then there's out. So we're going to get into this here, Greg. Greg, my main man. What are your expenses, Gregory? So let's be real specific. It's Greg's design company. Now Greg, sweet gig. Remember, he's got this box. Greg's got this sweet deal going where this is Greg, and this is where he's-- here he is. Greg is able to sublease some space from his mom. So he's now in the mom's garage. So this right here really doesn't cost any money, because he's a lucky dude.
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