The Anchor Price

[Music] hello everyone welcome to the 21 hats podcast I'm your host Lauren Feldman this week Sean busy Paul DS and Liz picarazzi talk pricing specifically how they use an anchor price the first number they offer prospective customers do they anchor low to avoid scaring anyone away or do they anchor High to disqualify unlikely buyers and to make the actual sale price feel more comfortable plus Liz explains the remarkable dream com true my product in Times Square PR gift she just received of course this is entrepreneurship so even when dreams come true there tend to be complications Liz's business is getting a wave of publicity at a time when her fabricator in Shanghai has been locked down for almost 4 weeks she's talking to domestic Fabricators as well but they too will be dependent on raw materials that have to come from China it's a problem she tells us even in Good Times owning and running a business can be a lonely Pursuit our hope is that these weekly conversations will let owners know they are not alone in facing challenges same thing with our daily newsletter the 21 hats Morning Report which highlights the most important news of the day for business owners and which you can subscribe to at 21h hats.com where you can also find transcripts of our podcast episodes and lots of other articles and interviews joining me this week on the podcast are regulars Sean busy CEO of Kinesis which is based in Portland Oregon and works with small businesses on marketing culture and strategy Paul DS who is CEO of Paul DS cabinet makers which is based outside of Philadelphia where it makes custom conference tables and Liz picarazzi who is CEO of City bin which is based in Brooklyn New York and makes trash enclosures and package bins the episode is titled the anchor [Music] price welcome Sean Paul and Liz great to have all of you here Liz I'd like to start with you the last time you were here you told us about a lot of stuff you had going on um a contract with the Time Square business district another potential government contract a deal to White Label your enclosures through another business what's going on anything happening so the biggest news which hit yesterday was that the mayor of New York is launching a new initiative to keep trash off of the sidewalks and time is the first place where it's happening and he held a press conference to announce the new Bins that will be deployed in Time Square and other places in the city and guess whose bins those are City bins City bins nice just did B well so far yes it's just us nice but this was the sort of media event if I were to dream of what I wanted for PR I would never never have even imagined this where the mayor is there with a lot of his Commissioners with a lot of city council members and he literally is standing right next to my product in Times Square so that's like the biggest news for me did that get picked up widely it did it got picked up very widely TV Publications all of it all of it is there any way to measure uh Liz the impact of all that I mean I know it's too early but how are you thinking about all of that attention that you got yes so within kind of the government and within business Improvement districts there's a ton of interest because the mayor also announced a program where business Improvement districts can apply for $20,000 grants to get bins and really the only player in town is city bin unless they were going to go on an exhaustive search so I can look at the interest from bids um I'm also looking at clients that we had estimates out to that now really want to buy because they saw it there's definitely more forms coming in through our website which is often how we measure things traffic to the website so it's really really booming I think that a couple weeks ago we were talking about your plans to distribute nationally and issues with that and I'm pretty sure I said New York City is a huge Market maybe you should just concentrate on that so I just want to put down that marker that I was right Paul like you're going to be able to sell one of your things to everybody in New York and that's a gigantic market so congratulations thank you thank you you were definitely right on that and Paul I remember when you advised me a few years ago before I made my product prefab in a kit whether or not I would sell Nationwide and you were very cautious but I went ahead with selling nationally anyways but I do agree with these sorts of Municipal potential buyers if I only have the city of New York and I don't want to grow like crazy I'm probably going to be Gang Busters for the rest of my life so that is a little bit of the challenge is ramping up but I think New York City on all levels is a great Market I'm into government now I'm already in residential working with property managers and Architects and developers I really don't want to spend anytime going after Chicago or LA or Portland or any of the Cities I thought of before unless it's total organic traffic coming our way but I'm certainly not going to spend any time or money trying to get in other markets after this happened what does this mean for your uh Bear Experiment so the Bear Experiment is still happening we don't have it scheduled yet remind us what that is Liz yes so we've created a bear prooof version of our Flagship trash enclosure and it's made out of steel it has special handles on it and it's meant for all of the potential customers who've asked us for Bear prooof over the years that's why we decided to prototype this this would not be in New York City I'm guessing it would not it would not it would definitely be more you know Colorado West Coast anywhere where bears are an issue in trash and bears are a safety issue as well so there's a lot of cities or towns where there's a requirement within the city or town that they have bear prooof trash enclosures so residencies you know bear prooof it's still moving ahead may move slower but also back to Paul's point the implementation of those enclosures in other states is a big it's a big undertaking for us even if the client pays for it it's still a very large undertaking so I think with bear prooof I probably would look to have more of a you know Mountain State Representative who's right there on the ground who could both do sales servicing and um installation I was at a seminar the other day and the guy said something that was so powerful he said really great strategy requires that you be ruthless and that you focus exactly on the thing you're working on you say no to all these other things and I'm curious why you continue with the bear work okay so let me get this are you Sean and Paul probably both saying I should put down the bear work cuz I anticipate that Paul's going to tell me that too um no I'm not going to tell you that I'm not advising I'm I'm I want to understand your reasoning and I am asking a bit of a leading question Here's my thought on it which is you've come this far and being able to say your thing is bear proof is actually just kind of impressive in itself so it may be that that whatever you learn about keeping Bears out of the trash is actually extremely useful in time what are you saying about New Yorkers Paul I don't think I I don't think I have to say anything about New Yorkers just understanding like what is the most extreme kind of uh use case for your product is going to be useful when you're deploying it in heavily trafficked space that nobody really owns when you put the bin out in front of somebody's house that house owner has some incentive to keep it good plus the amount of traffic in your average house is way less than Times Square so I think that that you I wouldn't I wouldn't go back on the bare thing I think that you might not want to rush to establish all that distribution because that's a whole different issue but just the idea of making a really strong durable product is what you're going to need to do if you're in public spaces absolutely so our normal enclosures which are primarily res residential are made of sheet aluminum and the bear prooof are made out of steel so for the upcoming work with the city and there's actually another thing I haven't shared yet but I want a very big contract that hasn't been announced yet with dsny what's dsny Department of Sanitation of New York so with dsny um they are getting steel because it is public use they're actually going to be put in parking spots so those absolutely absolutely need to be steel and not aluminum and that's a component of bear prooof as we did make those steel rather than aluminum for that and if you think about okay sanitation workers are going to be using this you see how they throw things around shall I say definitely going to be making it more durable for both the Bears and for sanitation workers you just told us that you've won another contract that hasn't even been announced and you got all this attention last time we spoke you were having Supply chain concerns are you at all worried that you're not going to be able to meet the sudden demand that you might be facing so I am worried um I I went back and I contacted two of the us-based factories that I had great interactions with when I RFP this out in the fall and let them know this is happening so there's one in New Jersey one in Long Island and my idea is to really activate and ready all three factories to be be able to produce and that is one way that I would be able to handle it I did also check with my Factory in China to check their capacity and they say that they have it I mean I know that I need to absolutely check on that but the thing that I like about the US option is that's something I really really want to do and if by getting government contracts where they may require us made and they're for a higher price tag they have to understand it that's my way to produce in the US and so I'm seeing this capacity constraint as a force to get some of my production back in the US you were concerned that you were not going to be able to find a domestic producer that would produce your bins at a price that worked for you are you now thinking that you're going to find a way around that yes just charges more and it's actually pretty simple it's pretty simple I'm going to tell the city if you want me to produce in Long Island it's going to cost 76% more and I know that because I RF peed this product out to 10 factories in the US and I found that this is how much more it's going to cost if they don't want to do it then not but I think that in a lot of these situations where they're requiring us ma they know that they're going to pay more so this is actually kind of an opportunity for me to switch it over because there's an understanding that the the cost is going to come up and that might be something they really want to do you know with the mayor of New York photo like you're entering the realm of politics and so essentially you're bringing a political value to them so they can then get on stage and say and this is made entirely in the United States by local Artisans here right in the New York Metro and that's worth maybe a lot more than 76% I think it is I really do Sean I think it is because that can become part of their story we helped this local woman-owned business move production or some of it to here to our state of New York I think that would be huge you know another thing I do look at is that I know that bin companies that contract with the government are definitely charging a premium to produce in the US and this is my way to jump over to that at least for municipal stuff yeah I mean my experience with government is if they want to do it they find the money where things stand with your plant in China is is it back up no it's not it's been shut down for uh almost four weeks is that becoming a problem yet or it definitely is a problem not only on orders that we've already placed but on this upcoming order and that's another thing that's a worry for me because the city isn't going to necessarily understand the long lead time but I did have a meeting with them today and I really flat out said I already know that this is going to take longer and be more expensive to produce in the US even given the shutdown in China and in Shanghai because we're still getting the timelines from them they know all this stuff is happening if it goes on much longer yes it's going to be a gigantic problem but we do need to remember that even if I produced in the US all of my materials are coming from China all of my sheet aluminum all of my bamboo boards all of my Hardware so those supply chain problems are hitting all of my materials regardless of where I produce are the time square ones aluminum L they are and are you concerned about the durability piece with that I am and I basically we made them put big cement barriers um on each side of them that is a little bit of a test and we did tell them that um I think ultimately it's going to have to be in steel but that is to be seen and this is a pilot I mean this is not this isn't it how many are are you going to put into Time Square so we have two four modules they're extra large size um they are in two different um locations in Time Square so 43rd and Eighth Avenue and 41st and Seventh Avenue would they be open to like AB testing it and say hey can we build one out of steel with local uh fabrication and one the traditional way and then just run the test have them pay the premium for it say hey we're thinking about you know the value of the you know sell the political angle definitely um and I have thought of that I haven't said it yet because we're just kind of getting into discussions but that's actually another issue is that um Frank who's my coo and he he's my husband as well let's keep this professional yes thank you Paul he's still really set on a umum and I have to say we've been having a lot of fights about it even at the celebratory dinner with our team last night we were arguing about aluminum versus steel and we had to stop I know and I really believe that they have to be in steel I mean they're going to be in New York City parking spots absolutely have to be in steel so that's a separate issue and every time it comes up I just say do you know what let's take some time next week to talk about it what's Frank's argument I think he's looking at lead time and price um I think he's looking at that our volume is with aluminum not with steel right now and what I say is we need to take the Long View we need to do what is absolutely best for the city and we can't take a chance of a bus or a car hitting an aluminum closure when we know that it's a lot weaker than steel like I'm not going to take a chance on that in a pilot with the city of New York where the literal mayor is looking for this to be successful we sort of went through a version of this issue over the last decade which is we used to only make our tables out of wood which is beautiful but a little bit on the delicate side and then we gradually introduce tables made with plastic laminates like for Mica and those are about 70% of our work now because people really value the durability and we don't sell it as cheaper it's just more durable that's such a good example of like the tension in a business where once you start to get operational around something that the forces within the business who happen to be your husband um like they want to optimize and continue on and then the entrepreneur is always kind of looking for the new way and how do you know when it's worth you know kind of changing and yeah that's that's the question well and it's also a perspective of you know I have a background in product development so I know that the stakeholder input on these installations is going to inform not just aluminum versus steel but any of the moving Parts any of the hardware and I'm really open to listening to that and integrating that and that's also something with Frank he's very focused on what's the timeline that the city gave us um can we meet it or not that's a reasonable concern it is but what I say is that in the RFP we very clearly said that this is based on our current product but done in steel so if they want to change the requirements that's fine it's just like software development you're there's going to be a change in the timeline and the price if you want to change it um so I actually I would say I'm a little bit more receptive to incorporating that feedback faster than Frank is comfortable with um and we're we're going to have to I'm probably going to have to send out a Google meeting to sit down with him early next week CU we're just both too fried from the last few days we could do that as part of the podcast if you'd like you want to schedule that right now my God instead of arguing in front of your employees you can argue in front of everybody listening to this podcast I like the way you're thinking Sean broaden the audience do you know what because I'm gonna win the argument okay definitely have to do it now are you guys doing the installation we are yes so that's one thing I've looked at and is there any issue with nonunion labor or union labor because that's something we run into when we operate in New York I mean I don't I'm using my current team and I'm going to be growing that team but I've never heard anything about a union requirement I don't think we're big enough for [Laughter] that I would default assume that anything that's being done in association with the city of New York is going to be have a union labor requirement somewhere but you should definitely find out cuz there's a that's not something you want a surprise about is there a way to prepare for that Paul yeah start start collecting large amounts of money you know what either that or included in the bid because I know that any of my competitors that had to pay for union labor they would have the same expense it's just the way it goes and and we've done a bunch of installations and there's plenty of companies that will do it it's not hard to find union labor it just costs more that's all so I as I said I would be extremely surprised if uh if this there wasn't a requirement somewhere to do the installation with union labor maybe not initially when it's a pilot but once you get to the real thing no no that doesn't make any difference when the union guys are out there preventing your truck from being unloaded or whatever they don't give a damn who you are how big or small you are they just want to make sure I mean they're they they enforce these things so we get around it by working with our clients very carefully if it's a construction site there's no way around it and if you're just like sneaking in months after everybody else has gone home that's a little bit different but you're always taking a risk well luckily you haven't had any publicity about this so they probably don't know about it no they'll know and particularly your contra track with this with the the sanitation department you you want to make sure you understand what the terms are of that I actually have one more thing to to say about um the servicing and the installation so I'm actually seeing seeing that as a really strong Revenue Source over time because it's not just the actual installation of it when you're talking about Municipal it's also the servicing so having a servicing contract so currently about 15% of our revenue is actually from installation so that's huge so if this was rolled out further we were doing all the installations and I get them on a service contract that's essentially almost like recurring Revenue subscription which if you listen to and Lauren I don't mean to offend you built to sell radio is they say always build your business so that an acquire sees that you have a guaranteed Revenue stream whether it be subscriptions or government contracts which do tend to be kind of Evergreen so that's one thing where I look at this expense of the installation as let me get this right because this is going to become a source of recurring Revenue if I roll this out to the city I'm going to ignore that commentz you you can edit it out no problem why no I'm kidding actually that's that's John waro right built to cell he's terrific yeah yeah yeah it's a great program people should know about it I love that one it's like probably far off for me who who'll see but I'm I'm building things pretty I'm trying to think of it that way I am super curious because you are going hard at a B2B play as opposed to B Toc are you thinking about just really shifting your resources and down you know just kind of downshifting the BC stuff I don't know yet I don't think there's a trade-off actually I mean we do a ton of what I would call b2g work which is I mean dealing with government as a client is just a different issue but there's no reason why you can't mix them we do it every day yeah but your business is more mature and has more Revenue it seems like you're in that stage of your business where you have to make decisions and and tradeoffs um but maybe I'm wrong I don't know no you're right no you actually are right and I've been thinking a lot about that because the C the customer acquisition costs with residential is a lot higher than with B2B and government um and I am resource constrainted I do need to figure it out I do need to hire more people would you take investment I don't think so I don't want to well speaking of money you told us at the beginning of the year that your goal was to double revenues this year how does all of this affect that goal it definitely helps us it helps us a lot it's definitely yes it's going to get me to to 2x this year and will that require um as Sean was suggesting some kind of financing are you going to have to figure out a way to buy all of the raw materials that you're worried about whether you're going to be able to get through the supply chain or not so I've done a couple things to try to move ahead on that so one I have like a line of credit from my bank it's very wimpy it's about 200,000 it's barely going to cover anything but I do have that and then I also contact Ed the Brooklyn Chamber of Commerce CU I know that they can help wbe contract winners with financing wbe yeah women minority business Enterprise so I'm certified as a woman-owned business in New York City and you know with that certification gives me access to certain financing tools that I don't think that men sorry you guys that men don't have um and that includes some sort of loans and lines of credit that will help finance a contract that a woman or a minority otherwise would not be able to afford so I maybe Paul can answer this question since you've done more work with government how much flexibility is there with those types of clients in terms of getting deposits UPF front because if Liz moves out of the consumer space where she has more control and can say I'll put this on a credit card and then I'll ship it you know does the government kind of say hey Will pay you 30 days upon delivery or what's been your experience with that Paul it's all over the map it's very unusual to get a deposit it does happen sometimes you're entering a world where each each government agency you deal with may have different rules and sitting over all of that maybe another set of rules from the state of New York and and there's there's definitely pitfalls to it but a lot of it is just sitting down and and working your way through what they want you to do and don't go in with the attitude that you're going to be able to get the state of New York to change course on anything it's unlikely I mean I I can remember my my first time running into this issue we got a call this was a long time ago I got a call from a Navy uh buyer and we talked through the job and came to an agreement on price and all that and then he said what are your terms and I said well I want 50% UPF front boom phone goes down Navy doesn't do that and so that was that and I had to had to get my head around the idea that you don't you're just not going to negotiate with certain people now we've had other government entities where I would say that the higher up you the person you're dealing with the better chance you have of seeing some flexibility but it's not guaranteed the all these government entities have very strict Contracting rules which is designed to prevent uh corruption and fraud and and you just you know like get your head around it you just got to do what they want you to do and that often means financing the job now we've done a couple of things for New York entities and I'd have to go back and think about the details of it but it with the federal government you don't get any money up front but if you do learn the system you will get paid and so we we're willing to finance federal jobs because I know at the end of the day they're going pay me and um so all I can say is you're about to enter a whole world that you you never suspected existed and uh you know once you master it it's actually a very good thing to know how to do so like my ability to deal with the Department of Defense is actually a huge Plus for every additional job we get because we just know how to do it and a lot of people don't Paul have you tried to take a government invoice to a bank to get financing no have you thought about it it is possible to do right I suppose no I haven't found that to be true you've looked into it list in anticipation of this contract coming up when I signed this little wimpy 200,000 line of credit I said I think this is contracts coming down the pike and I'm going to need to finance it can you raise my line if and when that happens if I bring you a PO no we need your 2023 tax returns to consider any increase in that $200,000 line oh you're talking to the wrong industry Liz there's a whole ecosystem factors yeah factoring is kind of the worst of it in terms of cost but there is a whole ecosystem your bank is not it um I mean a good B honestly a good bank I think would look at that and go okay we trust you but you're so early in the business cycle that that you probably don't have that level of credibility yet or you might be at the wrong bank that's another possibility in my experience I have a $200,000 line of credit and that's that's not enough for the bank to actually be interested in me and uh I think that they're looking for bigger loans bigger companies and and the banks I've dealt with just are not that interested in a small business customer trying to deal with what you're about to deal with there's other ways to raise money but not from Banks would be my take I mean what are we talking about Liz how much do you have to finance half a million bucks or what yeah it's about that and you can't can't scrape that up I would need a big deposit they may give it to you we got a significant deposit from a federal uh a federal buyer who had with the way they ran their agency apparently they had the authority to do it but a lot of it was this was a senior leadership room and so when the bureaucrats realized that the head of the agency is going to be sitting at our table there's a little bit more flexibility and I just don't know how it would play out you know what I think that I have a really good shot at that sort of eliter moving this ahead because of how high exposure it is possible but the the flip side is that person Imagining the headlines in the New York Post a year from now like slippery deal and look at these things and and uh so there's always a lot more cya concern than you might think Liz did we cover all of your news there's only one little thing that I will say is that when I was talking on the show a few weeks ago about this other trash enclosure company that wanted to be a distributor an online distributor for City B of your products but with their with their label on it their branding I got a phone call from Paul that same day and he had been listening to the podcast in he pushed paw and called me he was like don't do it yes don't do it oh my God Paul is a good human being I don't care what anybody says Paul I'm so glad you pushed pause so I met with my IP attorney the very next day on the suggestion also of Jay and um he basically said don't do it that's brand delution you know there's other ways that it could be co-branded particular if if it's the bear proof but that you don't give away any of your leverage on this so I wrote back to that guy and just canceled we didn't have any sort of written agreement um but he definitely poo pooed my concern and that made me even more glad that I rejected it um and then I found a different online retailer of trash enclosures and cans and now I'm listed with them and they're not messing with my branding at all it's going to stay City bin um and we'll see how that goes so good oh my god when I was listening to that episode all I could think of was Kirkland Kirkland Kirkland and like Co what Costco does with Brands that's not who you are no let's move on to another topic Paul you maybe the last time you were on you told us that you had taken your prices off your website for complex reasons that we didn't really have time to get into at that point I've been wondering about it ever since can you tell us why you took your prices off uh your website yes and the context we were talking about your conversation with the pool guy and his big success with telling people what pools cost and I made the remark that the pool guy and me are similar in that in that our buyers don't really know what our product should cost so I first put pricing on my website back in 1999 when nobody was doing that and it was pretty successful for a long time when we were selling residential furniture and then when we started selling more uh conference tables more B2B and b2g we actually put all the pricing up for those tables as well and I even built into one of the versions of my website a little quote generator where people could just put the put the parameters in of a table and then a number would pop out were you willing to stick to that number well it turned out to be a problem because the coding of the algorithm was buried deep into the website and it was really hard to adjust any of those numbers so my sales staff started to complain that that when people did do the thing that then they were kind of stuck with the number but it it also turned out that a very very small number of people even wanted to do that they just didn't do it so we rolled out a version of the website in 2009 that was uh sort of addressing all of that took that self- quoting feature off and put prices on the website and what we found was that we have a pretty wide range of different tables that we make and some are really big and complex and expensive and some aren't but the we put numbers up on all of them when we when we launched this new version in 2009 and what happened was traffic just stopped dead and it took me a little while to figure out what was going on but what it was is that people would come to the site and they would look at all the things we were showing and they would inevitably click on sort of the biggest fanciest thing the coolest table and then there would be a number associated with that that would be jaw-dropping for a lot of people who just didn't have any idea what a table could cost and then they would just go away how did you figure that out how did you know that was what was happening well we took all the pricing off after about a month and lo and behold people started calling again so it was a guess as to what was happening we could see which tables were most clicked upon and it it would be you know a table we made for the World Bank or a table we made for some giant crazy thing and then those are expensive you know those cost hundreds of thousands of dollars so we were losing the opportunity to have a conversation about pricing with our clients they were they were just scurrying away and when we took the price the pricing off then people didn't know what any of this cost and they would call us and be like the number one question we get from people today is what does this table cost and so we can at least have a conversation where we tell people what that particular table cost but then put it in the context of what they need and we have since put language up on our website that uh talks about costs in a way that's vague but useful and we have a couple of formulas like okay the cheapest tables we make are 500 bucks a foot that's not the actual number but I'm just pulling it out of the air like a 10ft t table would be 5,000 bucks and the most expensive a 10-ft table would be 50,000 and that's the range and so people have some idea of where they're heading but then we work with them once they call to figure out what they actually need and give them better budget numbers so one of the things that we've tried to be very careful about is introducing what we call the anchor number into a conversation and any sales conversation which is the first number that a potential buyer hears sticks in their mind and so what you want to make sure is that the the first number is not one that scares people away so that's why we talk about table costs as dollars per foot Because the actual numbers that are associated with those are not threatening it's a couple of hundred bucks to a couple of thousand bucks whereas the table itself may end up costing a lot of money it's just a way to start talking about pricing without a scary Anor number cuz the first number never goes away and that's just a reality of sales we recently highlighted a story in the morning report about how Steve Jobs used an anchor number when he introduced the iPad I think it was the very first version of the iPad and they flashed the number $999 $999 on a screen behind them as he was talking about the product for the first time describing what it could do and then I think the the price he actually introduced was likey half that so the idea was the opposite of what you're saying to to Anchor a really large number and then surprise and Delight people with a much smaller number that might have been scary if that had come first well that's very interesting but there's really no transferring Steve Jobs experience to Paul Down's experience we're just in a different world well it's a very different product and a very different price level yeah when I get to the Apple level of success believe me I'll be dropping big numbers on everybody so well I mean actually this is interesting because I found at least in my world the anchoring strategy if I anchor on the low side that's a problem for me um that invariably the client keeps wanting to return to that number even if we've had lots of conversations around well what you want to do is really complex and here's the thing and this is why it's more money they they will often return to that low number so I I actually use the jobs approach I I just go at it and say hey it's going to be it's it's probably this but it might be less and I've had much better luck with that but maybe it's different I don't know we're selling a service and not a product I think it is different every single product has a different approach that works for them and uh you you're also dealing with a client I mean partic I presume the people who are writing checks to you are fairly sophisticated they're business owners and uh I mean we deal with a lot of business business owners ourselves cuz a lot of bosses buy tables and so we we just have we've had these conversations so many times we kind of know how to do it but it's going to be different for every single business but that concept of the anchor number I I think it's real like whatever the first number is you got to be very cognizant of what you throw out there and and be aware of how you have to live with it as the as the conversation continues Sean when you talk about a project with a with a client and you give that anchor price that you're talking about are you talking about a price per hour or a price for the whole job usually I I use anchor in kind of a slightly different way in the way we sell in that I'm trying to Anchor against the Alternatives so you know I might talk in terms of you know generally Kinesis it costs to hire us about what you would pay for a senior level executive in your company and so they know like immediately okay that's a sixf fig investment over the course of a year and then I can talk about the depth of work that we're going to do and the complexity and the number and the different skill sets that are required so I'm essentially showing them yeah you could hire a person that could do kind of one Focus thing or you could get a team of people so I'm really kind of comparing our team against the Alternatives of solving their problem um because I you know fundamentally that's usually how people are thinking if they're a business owner they're thinking can I should I buy it or build it or lease it you know th those are their choices um and so that's that's usually where I'm going I I don't talk hourly rates or um I don't even talk project costs anymore these days when I talk to folks I I really want to talk at to an owner at a high level and say what is your challenge is it important and if it's important is it worth this kind of investment and and then if it is then we can keep talking about you know what that involves and the different aspects of it but but that's where I'm at kind of in my sales process after 20 plus years how do you calculate the actual price that you charge well so we like a lot of service providers you don't know the depth of the problem when you're first meeting somebody and often their idea of what the problem actually is isn't the problem um so you have to be you have to kind of do this dance of recognizing their struggle and pain but also leaving the door open to finding uh new new things in the process to help them understand what's what maybe are the real forces you know it's very common for example for somebody to come to us and say hey I need a new website and then in the process of working with them we discover wow you have 50% turnover with your employees will building a new website solve that problem and and then it's actually a much better conversation because now you're talking overall kind of business issues and and in many cases like we'll not build the website because we need to fix the turnover problem first because that Roi is much higher um than the new website and so we do kind of an evaluation phase in the beginning that has a fixed cost so clients know exactly what they're going to pay and they know exactly what we're going to do but through that process you discover things that are the real problems not maybe what are thought of as the problem and I and I think a lot of I think really good service providers focus on getting to the root problem as opposed to just giving people what they ask for so you you do that initial assessment for a fixed cost and then you figure out what the problems are and then you put a price on solving those problems right yes going through this from your perspective as a service pro provider has that helped you deal with vendors that you work with like hiring a lawyer who charges by the hour or has it given you any perspective on that that has helped you figure out how to handle those situations yeah it's actually interesting I was talking to a lawyer recently and it's a kind of a real estate need and you know he came highly recommended from somebody and and at the end he's like you know so we charge you know $500 an hour and I was like uh you know I kind of fell out of my chair and and then he later said you know and this project will probably take between $3,000 to $5,000 and so like he he kind of made a m I don't know maybe that was intentional maybe it was he was anchoring on this High number so then he could do the Steve Jobs thing but effectively what he was saying to me in the $3 to $5,000 number is I am an expert in this I am efficient I have done it before and so I was like oh that's reasonable but when you hear $500 an hour I'm like whoa that's crazy so but it isn't but it's not yeah it's not right I mean you if you he's he was placing himself in the pantheon of lawyers because after you've dealt with a few of them the $500 an hour guy is probably a pretty decent lawyer and the really fancy ones are a lot more than that so he's telling you where he lives he's telling you whether he's a Chevrolet or Alexis or a Lamborghini yeah I I think what I've tried to do as a service provider is move away from hourly rates because you know fundamentally it's buyers don't know like I didn't know I've never bought real estate Legal Services before and so I was like wow that sounds like a lot of money but it actually isn't and so you know fundamentally I want to get to a place of what is the problem here's what it's going to cost to work through that problem together is that reasonable for you will will the value of that you know exceed what we're charging um because hourly rates are it's just an abstraction other than what Paul is saying which is you sort of assume somebody that's $1,000 an hour is better than somebody that's $500 an hour is better than $250 an hour but that may or may not be true I have a question Sean um given that you're in Services how often do you need to do change orders on engagements when the scope expands yeah that's a great question so we've gone from over the years highly um descriptive scopes of work that tried to cover for every single contingency so that if the client came back and said well we want to change things then we could say well this is going to cost more money and we're going to issue a change order I've never met anybody in my life that likes change orders so um what we've done to eliminate that issue is we no longer have these really tight Scopes we actually have much more of an agile process where we say we're going to work on these four initiatives do you agree these are going to help you yes great we break down those initiatives and component parts and then we say this is what we think is going to happen as we work on these things but then as we work together we we change along the way I mean cuz somebody once said in a it was just so brilliant he was a a opponent of agile working he's like your stupidest moment is the beginning and so most people are building proposals when they have the least amount of information and and so what we've done is we've addressed that and said look like an employee you're going to hire us and you're not going to know everything we're going to do you have a general idea right if you hire a marketer you know they're going to do marketing but we're going to shape what we're going to do together into large buckets and then as we get further and further along we're get Tighter and Tighter and Tighter on what the outcome is and and that does require a level of trust with the client um but it's a way better client to work with you know honestly so that's how we've gotten out of the change order uh Paradox it's good thank you Liz with all that you have going on are you at all rethinking your pricing strategy or are you happy with where you're at I'm pretty happy where I'm at um we've been communicating price at least in direct mail more than we used to so if we've got a postcard with a nice photo configuration on the front and the back um we didn't ever put price on that and now we put you know starting from 4500 let's say and we are doing that a bit as a filter because we're sending this primarily to a targeted list of affluent people or those price tags are really not going to hurt them um if anything maybe they find it attractive so that's one thing I've shifted recently and on my homepage I don't have pricing anywhere and I have to say that's not even really a deliberate decision um but if they get to any of the product pages all of the prices are right there and it's a configurator so if they have three cans it's one price if they have six it's a different if they want a package loger to be added it's a different so we make it really easy for them to get the price and to configure the uh product to what they want but the other thing that I have done is we've visually shown the difference between City bin trash enclosure and our competitors in a couple of kind of downloadable PDFs that are through a web form where they have to give their email address um almost like kind of a Marcus Sheridan where he's certainly advocating for providing a buyer's guide to someone who's buying a trash enclosure where you show our product next to the competitors and you lay out what the differences are not only in price but in all of the different features so that's something where people that are really uncomfortable with price I'm basically saying well here are two options you can go to Home Depot and get a reverber made or you can go on Wayfair and get this Cedar shed or you can have someone locally fabricate an iron enclosure and I put the pricing and the features for each of them side to side just like you see on any sort of online purchase of software services or anything and that that helps get over the price objection because then I'm putting my product next to a rubber made plastic shed and that's what makes the point I remember seeing something years ago it was a study on conversion rates and whether companies put their pricing online and it was crazy how much more effective it was when pricing was transparent um and I think I think the challenge is that you know you could read a book that tells you do it this way but it's probably specific to that business and so I think every owner has to kind of figure out the right path and I think Paul's method of ranges of prices is really cool I think your strategy of anchoring against other options is really cool um I'm actually thinking about it for us too you know we've never put it on our site but I'm just like I just want to engage with owners who kind of understand like the value of investing in something meaningful and you know if they see that great and they're excited by it if not then they move on I don't know we'll see I think it's probably least appropriate for you Sean who is it that you imagine is going to look at your website and either leave or stay because there's a number on there I just don't yeah I mean it's a tough it's a tough one in the past where we've really focused on getting lots of leads through the website the amount of energy I have to spend on disqualifying leads is really high um and then you know kind of currently I I I just it's just not performing at the same level i' want it to and we need to do just a major overhaul on it it but I'm just I I have found it's been my experience when I talk to owners and I say to them these are the things we're doing we're working across marketing culture brand you know value and generally the magnifier of the work together is exponential um it is way more powerful than hiring one person if you're interested I could totally talk to you about it and I could give you case studies you know and and and like 80% of them are probably like oh that's kind of scary but then 20% are like that's really interesting and then those are really great customers and be because our model is a recurring Revenue model you know we keep customers for three four five 10 years you know if we get even if it's just 20% those are fantastic clients um versus the highly transactional nature of most service providers where they're kind of always looking for new customers I I've been all about recurring revenue for the last 10 years and right fit customer I just don't want to go back so so part of me you know thinks the pricing piece is a way to like attract the right customer not not the Shopper who's looking to you know build a new website but I could be wrong so you you personally have these conversations with people who contact you yeah yeah well that's that's one thing you might want to think about so I've tried to grow the number of leads we have and we're currently on track to have about 1,200 this year so I hired someone to have that conversation he's worked for me for six years now and his only job is to take the initial contact from whoever and then get in touch with them and have a conversation with them and see whether they're suitable and when you're not doing it yourself it's a lot easier to do so uh then you can concentrate on growing the amount of traffic and you know AB test do whatever you want to do but then there's somebody else whose job is just to execute that one thing so because I think that the response to an inquiry is is the most critical part of the sales process and it's really underinvested by a lot of business owners they think okay I got to put a ton of money into my website and they try to do the whole sale on the website or they're like you because I used to do that too I used to be the guy to answer the phone and it wasn't until I stopped doing it and had to explain it to somebody that I really started thinking about what I want to actually have happen in that conversation and then the other thing is that we started recording this guy and hearing what comes out of his mouth and that was pretty eye opening too because people drift off message all the time and so you've got to keep you've got to just be extremely disciplined about these intake moments and making sure that you're you're identifying who you're talking with and whether they're a good fit and then just telling the other people sorry you know go away but it's better for you to be uh better for you to be rejecting them than for them to be rejecting you and when you put the number up on the website you're giving people a reason to reject you and that's sort of the the conclusion we came to with the product pricing but uh yeah there you got my two cents that's a whole another show especially honestly I think the most valuable thing I in that whole thing that totally aligns with my experience is how leads are managed especially in the initial phase because there's all this correlation between the speed with which you handle a lead and the likelihood of closing and the vast majority of businesses fail on that front um and many of them don't even respond to forms that are submitted to their side it's crazy all right we are out of time but you guys have given me ideas for at least three more shows including uh next week's debate between uh Liz and Frank about whether it's more important to hit your client's timeline or to give them a product they actually are happy with uh we're all looking forward to that Liz but when you put it that way Lauren you're lining up with Liz already I like it yeah I can see where this is going to go why don't I not tell him until an hour before the taping so he doesn't have any time to prepare exactly my thanks to Shan busy Paul DS and Liz picarazzi as always thanks for sharing guys wait wait don't leave yet if you have a question or a comment that you'd like the 21 hats owners to address send it to me by replying to your Morning Report or by email at Lauren 21h hats.com that's l o r n at21 hats.com do it now before you forget and don't be afraid to tell Jay what you really think you can take it and if you got something out of this conversation help us reach more business owners tell a friend subscribe and review us wherever you get your podcast follow us on Twitter subscribe to the morning report at 21h hats.com this episode was produced by Jess dubron founder of blank word Productions okay now you can leave thanks for listening everyone [Music]