Learn how to pick the optimal price for your product in this series. Clay discusses the factors you need to consider when pricing your product.Sign Up to Watch
- We are here today talking about products. We have Clay Clark here sharing his advice and expertise, all of his tips. The biggest thing is one I have a product, what do I sell it for? - Yeah, this is big, and I wanna make sure that the thrivers are getting this, because I'm gonna tell you things that don't make sense, they're not common sense. - [Woman] Right. - They're not gonna go with what you've been told, they're gonna go against what you've been told. - [Woman] Interesting. - So here's an example, okay, the first principle is focus on paying yourself first and making money. - [Woman] That does sound counter-intuitive. - So I talked to a doctor just yesterday, the doctor says to me, "I'm gonna start selling memberships "at my medical clinic." Thrivers, how cool is this idea? Unlimited doctor visits throughout the year, it's a month-to-month fee, so for people who have no insurance or very little insurance, and you can come back as much as you want, and homie's talking about pricing it for under $200. - I like that better than insurance, actually, I'd rather do that. - Yeah, so he says, "Well, what about--" And so I'm going, it's a good point, a good question. So here's what we got into, I said, "How much do you wanna pay yourself per year?" And he'd never thought about that, he's like, "I don't know, "I just wanna figure out what I need to charge." I'm like "No, stop, how much do you wanna make per year?" And we thought about it, and we wrote down the number 30,000 a month, because he has certain expenses. None of our business, what they are, but he has certain goals, none of my business, but I imagine he wants to buy a boat, I'd imagine he wants to take his kids on vacation, I imagine he wants to save, I imagine he has charities he wants to give back to. So, we did the math, and we figured out he wants to make 30,000 a month. And I said, "Okay, so if you wanna make 30,000 a month, and you are charging $150 total, and you had 200 customers, that's how much you would need to charge, assuming no one else worked there, and there was no overhead. But you start with how much do you need to, just obviously. Per customer, you need to make $150 per customer if you can handle 200 customers. So the question starts with how much do you wanna make? And another example with the haircut business, my brother-in-law is involved in the Elephant in the Room. - Elephant, mm-hmm. - How many of you know a barber who's just makin' it? - [Woman] Oh yeah, several. - Okay, they're just barely-- - [Woman] Several. - And they're like, "Hey, you gotta come on in, "get your hair done." And they're workin' their fingers to the bone. - [Woman] Packed. - And they're always lovin' the new style, their hair's always got a little red in it, a little blue in it, they're always tryin' somethin' new, they're tryin' the different... And every barber that I've ever met, I've only met three barbers that are not financially just moment to moment. A lot of barbers are goin', "Hey, could you give me "my tips tonight, I need those right now." - [Woman] Oh yeah, definitely. - A lot of barbers aren't reporting those taxes, because they wanna keep all that cash, I'm just sayin' this is real stuff. So my brother-in-law says "I wanna cut hair for a living." I said, "Okay, cool, how much do you wanna make per year?" "What do you mean?" Well, before we price the haircut, how much do you wanna make? - Okay, I have a question about that, because that is a really great tip, but why is that not where we start? I mean-- - Well, most people never start there, because what they do is we are taught to be selfless, and so we always think about, well what am I gonna pay my front desk guy, what am I gonna pay the lady who helps me, what am I gonna pay, what am I gonna pay, and we add up all the costs, and then we just barely charge enough to make it. - [Woman] So you have to start with yourself first. - Put yourself first. - [Woman] And then go through-- - Which, on a little bit of a spiritual woo-woo, little bit of woo-woo. - [Woman] I like woo-woo. - If this is my coffee cup, and it's weird, but let's just say that I hadn't had a sip of it already, and Trina's like, well you know, she said, "Can I have some coffee?" If I had enough coffee for me to be adequately amplified, then I could say, "Yeah, you know what, we've got enough "coffee for both of us, here's some coffee for you, "here's some coffee for me." Now a third guy walks in, "Can I have some coffee?" Sure, fourth guy, fifth, sixth, pretty soon, I'm sittin' there asleep on the mic Get the guy some coffee, get him some coffee. We can't, he's given it all away. This is how people are goin' through life, they're givin' all of their money over here, you get all these letters from missionaries wantin' your money, you get a message from the March of Dimes, they want your money, meanwhile you need some money. So I'm just talking about let's focus on ourselves-- - [Woman] First. - First. - And it doesn't mean that you're gonna forget about the other people, you're gonna include them, too, but start with yourself first. - And a little marriage tip, talked to a thriver last night who said, "Hey, I'm tryin' to find a spouse that could make me happy, and I wanna know if you had any--" True story, "I wonder if you had any trainings on that?" And I said, "Bro-town, you have to be happy first, then when you marry, you focus on making the other person happy, but you can't be... Someone else can't make you happy, that's a decision you make. So thrivers, the customers can't make you financially abundant, you have to focus on making yourself financially abundant, then you can bless other people, that's how that works. - I like it, I also like how you said the doctor, what was his goal for the month, like what was his standard of living, what was his goal, because that's gonna be different for everyone, but you can set that for yourself, right? - Absolutely, you can absolutely set it for yourself, and everyone's different. He said, "I wanna make 30,000 a month." You know if he said 10, or 5, it'd be different. Now I wanna read this notable quotable to you by Ayn Rand, she's a best-selling author. Some people hate, hate when I reference her, and my family people are like... - I'm a former English teacher, so from a literature standpoint, I can just appreciate analyzing the work. - Okay, so here's what I'm gonna read to you, she says, "Money demands that you sell not your weakness to men's stupidity, but your talent to their reason." What is she saying? We're saying money demands that you sell not your weakness to men's stupidity, she's saying don't take advantage of people by selling them crap that they don't need, but if you're gonna sell somebody, if you sell your talent to their reason, if you are bringin' it, I'm gonna tell you this thrivers, I am not a perfect person, but I bring you every ounce of what I have, I know you do, too, we're here to help you, this is what we do. And I'm gonna bring you the very best of what I have, it might not be perfect, I know I need some Photoshop, but the thing is I bring you the best that I have, and I believe that if you're reasonable and you see the value in it, then people are willing to pay for that. - Okay, you quoted Ayn Rand, so now my literature mind is kicking in, she has another novel called The Fountainhead, and it's about this guy who is an architect, and he is into what we know now as modern architecture, but he's pricing up against-- This is written in like the 1940's and so he's going against what's considered traditional architecture at the time, and anyway the whole theme is about when to honor yourself as an individual, and when to be a part of the collective. - Okay, okay, now we're gettin' into, real quick, 'cause I was just kind of one of these knowledge bomb moments, where I gotta-- Alright, so here's the deal, if you guys get a chance to go buy an album today, or go on iTunes and find it, I want you guys, this is a good example for you, if you Google One Republic, and you look at their first album called Dreaming Out Loud-- - [Woman] Yes, I remember that one. - It is almost a spiritual album-- - [Woman] It's good. - And it has a lot of meaning, and the song that the radio played was Too Late to Apologize, they also played Stop and Stare a little bit, but a lot of it was, it's... Now the next album, they put a little bit more pop in there. Good Life, you hear the song Good Life? - [Woman] Yes. ♫ Good good life ♫ - Right, they put that in there, and people start to go, "I know that song." Then they put in All the Right Friends in All the Right Places, and they started putting in a few more pop songs. Now why, how does this pertain? Well, if you make songs that are pop friendly, like One Republic has done, now people get to hear the rest of the album because they bought it. - [Woman] You got 'em in with that one-- - Got 'em in with that one, boom. Third album, you know they have that song Counting Stars. All these songs that are mega-hits now. I'm just telling you what happens is, is now more people get into the artistic merits of the album because they sold out and made a pop song. - Right, but it's something about, you have to balance those two. - [Man] You do, because those songs still have the lyrical meaning that they love. - Definitely. - But at the same time, it's not quite as... I know people who are like purists, so like, "You know U2 isn't what they used to be. "Back in the day they wrote songs with meaning, "now they're just writing pop music." Well, you gotta have that balance, but all I'm saying is that at the end of the day, you live one time, it's very, very important that what you're making is your life's work, and whether you believe in God or not, I would just say I view work as worship, and you wanna do your very best at what you're doing, so that you feel good about it. - Yeah, here's the thing with this, too, that's so interesting to me with the whole individualist or collective thing is a lot of times we focus on collective, and we forget about ourself as an individual, and that's the thing that keeps standing out to me when you told the doctor, "You have to start with yourself first, "and then you can take care of the collective." - I have a racist question for you. - Okay, what is it? - Okay, here's my thing, we have a lot of thrivers who are on the site, from all different countries, we have 75-something countries. 75 countries that's crazy. - [Woman] That's awesome. - And I talk to a lot of Asians, a lot of Asians. For some reason, Asians love us. - They love us. - And it's 'cause I'm Caucasian, see there? No, but seriously, and then we talk to a lot of African Americans, talk to a lot of people, all different backgrounds, but I've heard specifically with some African Americans I've talked to in Brooklyn, where you at? - Brooklyn. - And these people they have, one lady she goes, "I feel like as I have been moving to the advancement "and improvement of what I've been doing, I'm trying "to make more money, and I set my prices, "now my money is where I need it to be." - [Woman] Sweet. - "Now I've decided to move," and she's like, "Some family has been like hey, don't forget your roots." And I've seen this a lot, I mean that this is a pattern I've seen a lot, what's goin' on and why is it that certain cultures don't value putting yourself above the collective? What is goin' on where the collective's trying to hold her and other people back? - I understand, that's a really interesting question. Number one, I can't speak for all people, but I can just share my experience, I'm puttin' that disclaimer because somebody will call me out on that-- - [Man] Not you people, you people. - Right, I think sometimes, you know, our family, our ties, they're so strong, we're so rooted in them, and it's a beautiful thing, but I think it goes back to mindset. You know, do you have a growth mindset, do you have a fixed mindset? For me, I come from a family, and they were saying "Hey, go out and do more than I did, achieve more than me." So it just depends, some people are intimidated by that, they don't want you to do that. I think it goes back to mindset, really. - But somebody listening to this might need to break free right now. - [Woman] Yeah, you gotta break through. - Of your mindset, and move above, now-- - [Woman] Or the collective mindset of your family, you know. - And I've talked to a lot of these Asian thrivers, I'm just bein' real, these are just patterns I've seen, and it seems like they're high achievers, a lot of these people. - Yeah, definitely, culturally it's an expectation. - And one guy was like, "I already make a lot of money," almost crying, and he's like, "I don't wanna make any more, what I'm looking for is life balance, I feel like "they're putting their goals on me." And I'm like, "What do you mean?" He goes, "Dude, I had to practice my musical instruments--" Not even kidding, "five hours a day as a kid." I'm like "as a kid?" "Yeah," he's like, "I had to be top of my class, top, top, top, top, and my business is top, and I just wanna be able to relax." So I guess my theme here is when you define your pricing, I know we're talking about pricing, but decide how much you wanna make, don't let me decide, don't let your mom decide-- - [Woman] Kind of like a balance, a healthy balance. - What do you wanna do. Now the next thing, the next principle, is you wanna know your costs. - Yes, tell me about the eggs, you told me about the egg story, you were talking about it-- - Well, there's a bakery I used to work with back in the day in Dallas, and this lady was super sweet, nice lady, and I'm not kidding, she'd sell wedding cakes for like $600. $600, okay, and at the end of the-- - [Woman That's A delicious Cake. - Well, at the end of the wedding, no money was left. So I'm like, how are you charging someone $600 for a cake, you're selling four cakes a week, how is there no money left? - [Woman] Delicious cake, no money left. - Well, she's like, "I don't know." I see that's the thing, everybody, "I don't know." And she really was crying, "Every month, "I get to the end of the month, and I don't know." And I felt bad, and I'm not trying to make light of it, but she really was in a bad spot, single mom, goin' through stuff. - [Woman] That's horrible. - And I was like, "Well, it's goin' somewhere." She's going, "I don't know where it's going." So what I did is I had my wife follow this person around, and literally cost out everything she bought during the day. - Good move. - And we discovered that if the numbers that were in her head were actually true, that she would be paying $20 for an egg, if they were actually true in her mind. What was happening is she was a terrible manager, and had no concept of how much time people were spending to, you know you can either make the batter, make the cake batter, or you can make the cake batter on Facebook, it's like six hours to make it, or an hour. - So is this based off of doing poor math in her head, or is this a productivity thing with her team with the $20 eggs? - Two, she did not know her unit economics, so unit economics are, and if you own a bakery, as an example, you need to tell people it takes you seven minutes to stir, it takes you two minutes to pour, one minute to-- three minutes to -- - [Woman] Because time is money, and this is all tying in-- - 15 minutes to put the frosting on, they call it crumb coating, but they put the crumb coating. We had one person, no joke, spending two hours crumb coating. Crumb coating should be like 15 minutes. - [Woman] Can't do that. What's crumb coating? We have other episodes, hang in there. - [Woman] Vanessa taught me that by the way. - Oh really? - Yes she did. - And then there's fondant, you know putting fondant on it, or there's butter cream, there's different kinds, and if you put butter cream on there, as an example, that's very detailed, but it shouldn't be taking you six hours. So you have to define how much time it takes to do every task, and how much money it costs for every item. Otherwise, you end up looking at the end of the month, and going, "I think these eggs--" Literally, the thought process, I talked to one of her managers, she goes, "I just think the cost of eggs has gone up a lot." And I was like, and seriously, I'm not kidding, she kept going back to that. - Blame it on the eggs, blame it on the eggs, yeah. Milli Vanilli, they should've-- ♫ Blame it on the rate that was ♫ - And so the thing is, I'm just tellin' ya, I saw that, where this person was working 60 hours a week, and there was no understanding of cost, so thrivers, an action item, I want you to go ahead and go to our, just email us, firstname.lastname@example.org, we're gonna give you a template for a cost sheet for my photography business. And you can just plug in your stuff instead of my stuff, and you're gonna have what we call a performa, which is a projection, a projected formula of what it would cost, and what happens is with our photography company, I know after every wedding exactly how much I'm gonna make, and the good side of the story is with this bakery, we ended up figuring out that if you hold people accountable to these hours, so we started paying people per task, not per hour, you will for sure have a $300 profit left in every cake. - [Woman] Boom. - And then if you do 10 cakes a week, you'll make $3,000 profit, bam. So that's the main thing, so I wanna make sure we're just gettin' that. One is just decide how much money you wanna make. Two, know those costs. - Awesome, thank you so much, Clay. Up next, we're gonna talk about knowing the market.
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