Welcome And Weekly Updates

Dave 0:02

Welcome to Putin Packet, working your TP, real life data, quite credit, and it's really important to be quickly in your future. So whether you need help with applications, accountability, and maybe just getting your mindset right. We're here and waiting for helping. So grab your favorite cup of Joe, let's jump into the show. Grab your favorite cup of Joe, let's jump into the show, as that weird voiceover guy there says. But welcome to another Friday. Welcome to another episode of the Business Unscripted Podcast. And here, if you're a business owner, you're an aspiring business owner, you're looking for lessons to be learned or some strategy, some advisory, you're in the right spot. Dwarne and I here share every single week some of our struggles, our successes, our obstacles, ways that we've also helped our clients overcome different situations, we'll say, in their business and different opportunities. So you're in the right spot. Thank you for being here. We enjoy every one of you. So, Dwarne, thanks again for joining me on another episode, sir. How are you?

Duarne 1:09

I'm well, Dave. Thanks for having me again. Busy, crazy week here. Another rainy night, actually, back here in uh the Philippines. So good. Uh we're entering the monsoon season, I believe. So lots of night.

Dave 1:23

It's rainy night for nights, like you know, we were talking, you know, a little pre-show. It's good for the for the cuddle weather, and you know, if if it's a little cooler, a little body fire, you know, it's good to get evening weather over there.

Duarne 1:36

That's it. It's like time for a movie.

AI Workshops That Save Real Time

Dave 1:40

Of course. A lot of how you been. Uh, we are we have this has been a pretty crazy week as well, like really busy in terms of you know, Monday had a big sort of project wrap-up board meeting, so we were preparing for that. And Tuesday did our first you know, workshop with a couple business owners related to like co-work and implementing some workflows and getting you know some education there. So we had one live and then you know follow-up uh virtual with somebody else. So it was really good. You know, it in there is interesting because you know, we had a there's a she's I think um don't know her exact age, but you know, she was more elderly, right? But she's still in business. And it just blew her mind what could actually be done with the workflows and taking some of the the manual load off of you know her day-to-day. And I think just being you know, open having the eyes opened and being able to kind of provide that support, you know, it's awesome to see that sort of like, oh my god, this is gonna save me hours, you know, and it was just as simple as you know, summarizing the emails and having it prompt what she should be following up on with her clients that she hasn't gotten a response from, you know, and then creating the messaging coach in her co-work to you know read not only what how she writes so it you know learned and taught itself, but then also it can give feedback and then present the drafts in the executive summary every day to you know say, hey, here's John, here's a draft email, you should respond to John, here's what he said, here's the change in this project. And there's so many other things that we want to do, which I'll start there. You know, the biggest thing you can do when it comes to AI is just get one or two things done and get them working correctly. It's so easy to put one or two things in place and then want to do three, four other things that you think of, and then you the first two things never get finalized, never get wrapped up, never get sort of fully polished. And I think that's one of the biggest lessons I've learned, especially over the last two or three months, as things change constantly in AI. Yeah, it's there's always the next new thing, and you never wrap up anything. And so, really, you have to be really focused and pay attention to what is it that is gonna move my needle, not what is nice to have, right? What is what do I need to have with my AI workflows to help me, you know, kind of handle my business and my day-to-day that much better. And then Wednesday, we we had an AI panel for you know for a local business group, and that was awesome. It was great discussion. I think a lot of people had you know some good questions. We were able to kind of point them in the right direction. And the biggest thing for me that came out of that for you know kind of teaching people is because that question came up, where do I get started? And the first thing I I say there's two things. You need to make a list before you touch anything, you need to make a list. Uh the first is uh what are you doing now in your day-to-day that uh can be done manually or not manually, right? You're doing it manually now, but it could potentially be automated in terms of a workflow. That's that's list number one. List out those those tasks. Uh number two is what are the things that you you know you should be doing because you hear it if for other business experts, or you know, you hear it from you know advice that you've been given, but you don't have the time to do. And you wish you did, you just don't. Those are the two kind of lists that you create for yourself, and then from there, that's gonna be your roadmap. That's going to guide you in terms of where you're gonna take your AI, you know, sort of automation and support journeys. Love to get your thoughts on that as we get started. And then, you know, I know we wanted to talk pricing and value today, so we're gonna kind of jump into those from last week. So give me some insights on what you feel about the roadmap and and kind of how you get your direction AI there.

Duarne 5:36

Yeah, I do like that. It's interesting actually. I was having a my wife shares an office with me at the moment, and we're building out her office next door. So next month she'll move in there. But uh for now, we share an office, and she was in here today working with me, and I got I got I was getting a lot of feedback from a client who we're trying to sign out. We haven't done any work with them yet. We've had lots of conversations, lots of meetings, lots of back and forth data, a couple of contract drafts, lot of a lot of work. And I said to my wife, I was I'll tell you what, if I didn't have AI to help me, I would be telling clients like these, sorry, I don't have time to deal with you. Um, and that's the reality, right? Like one of the things that came through is like there's this off-the-cuff comment based on a contract that we sent across where it was like, oh, it'd be great to have like some sort of cheat sheet full of frequently asked questions and how to position this to our clients. And I'm like, Yeah, that sounds like actually a really good idea. Give me an hour. Went and prepared something and then sent it back across. Oh, this is perfect. This is exactly what I was thinking. Great, fantastic. It's amazing, right? Like it is, it's like I couldn't have done that. I lost a deal years ago because the client didn't see the value in my proposal because it wasn't as pretty and as well laid out graphically as a competitor. I didn't give it to him in a PowerPoint presentation, I gave it in text format. It was very structured, it was very direct, it had everything that was needed and none of the extra. And I did that because I didn't have the time.

Build Fewer Workflows For Better Results

Dave 7:23

And here's go back to your QA really quick, right? Is how easy is this to create for yourself? If go back, you can grab all of your chats if you if you transcript transcribe them, drop them into a folder, direct co-work to that folder, and simply say, I want you to review these chat transcripts, which are from my client meetings, analyze what are the most common questions that the client is asking us, and then analyze what the responses have been across all the sessions and and make a suggested you know, sort of QA and improve how we answer this question. It it's it's so easy for us to kind of create these things. I think ultimately, you know, we don't think about them because it's out of sight, out of mind, and we think, oh my, the the workload on that's gonna be you know ginormous, and we're not gonna be able to do the that work. And it's like, no, no, no, like it's as simple as you know, now we just have to gather. And even now, sometimes you don't even have to gather, you just have to point it in the right direction. You know, like with cowork, if you have a note-taking software, you can say, here's my note-taking software. I want you to go back through you know the last 60 days and analyze client conversations, you know, and if you tagged it right or put it in the right folder, you know, I'm just thinking of granola because I use granola, so we can say go to my prospect folder, right, and just read it. I don't have to do anything because it's already there. I just go to my granola, it's already connected to granola, read the notes, analyze what people are asking, analyze what I typically say. If I if there's a variance, bring it to my attention so I can correct it myself, because how else are you going to get better? And then create me a cheat sheet, you know, that that I can give out to future staff, or I can put on my website, you know, all these different things that you could potentially do.

Duarne 9:05

It's it's it's awesome. It is, and like even like it's an even simpler option for me today, like was this was all in a conversation directed around one contractor's agreement. So all I did is drop that straight into Chat GPT with a simple instruction in a new canvas, I need to create a cheat sheet with frequently asked questions that a small business owner would be asking based on this contract and the contents of this contract, pick the most controversial clauses and focus on these questions and issues that have been raised by the client already, copy paste, put something together for me, and you know, it went through and put it together, and then I was able to go, yeah, that's actually not too bad. I'm and I gave it a bit more direction, of course, and then gave it some of my opinions and it went and put it together. And at the end of it, it raised an additional question. And when the client says, Hey, so with this question, what does this mean? Like from a standpoint of an increase each year, blah, blah, blah, for the staffing solution. And I'm like, Well, you know, that means this. And I put together a little why we do it that way guide, sent that across. And then I'm like, Oh, I can make an infographic from this. So I made an infographic from it. Shared that and was like, wow, that's really cool. And then I've looked over at my wife who handles HR and I said, What do you think of this infographic? Oh, can I use that for the when I present to the team? Absolutely, it's a it's an internal and external safe solution. It's just talking about percentages.

Dave 10:41

Well, and and that's that's the other thing. And that's actually a great segue into what we kind of want to talk about today, right? And and value and pricing, you know, in terms of what do you mean you have to do an annual increase? You know, because so many, so many people get stuck in. Well, I they agreed to twelve hundred dollars a month or fifteen hundred dollars a month. I don't want to increase the price, but yet your back end, your costs are going up, all of that. And so that's why I think it's a valuable discussion on on pricing. But before we get to pricing, I think it comes into value. And value you have to get yourself out of the hourly mindset. How many hours am I giving the client? How many, how many support you know meetings or or sessions are they gonna feel my my time? And and ultimately you have to get yourself away from that and and start thinking of what is the value that our support is bringing to that individual? And you and you have to one understand that, you know, and you do that by having the conversations with them to understand what's important to them, what are they looking to get a solution for? From there, you can then represent your value more appropriately. But I'm interested, you know, Dwarne, on your end, what what have you done recently in terms of changing that sort of you know, going from especially when you know in part of your business, right? It's the VA world. So that's a big thing, you know, hours, you know, how many hours a week am I getting? And all of that, versus how do you shift that towards the value of, hey, here's the support you're gonna get, here's the price. How have you potentially started thinking around that?

Fast Client FAQs With AI

Duarne 12:57

Yeah, interesting. One of the first things that we had to do, and this was the realization that I had in a discussion with you probably 18 months ago, and that was we need to understand what our real hourly rates were because we had them completely wrong. It's like my time is worth X, the employees' time is worth X. I spent X amount of time doing this, but you don't factor in your administration team who are a non-earning, non-income generating part of your team. They have to be factored into the equation as well. You've got overheads, you've got real operational costs, your computer breaks, you have to fix it. Otherwise, you can't work. So you need to factor in all of these things into the equation, and that's one thing I like about your cash flow system, right? You put money in the right places for that time, and that helps you generate an idea quickly on how many hours, what the real cost per hour is to actually provide a service. And one of the key factors in that is you have the real cost per hour, but then there's the value proposition of what it's actually gonna what the client wants from the outset. You need to be able to do the maths and say, look, it is gonna take my tech my company 15 hours to produce a suitable outcome for this client. But my team is also very refined. We've been doing this for a very long time. We also have all these amazing tools that we've invested in or built to be able to do that. So our cost is not necessarily 15 hours, it may actually be 15 hours plus a 20% overhead to allow for variances that might occur or unforeseen circumstances, and then we have to add the profit. So the profit is typically determined by what the value proposition is to the client. So that's how we typically structure it now, as opposed to being just, yeah, this is what it's going to cost, but this is the per hour rate. Websites are a prime example. We do not build websites on a per hour. I had an inquiry come through this week and it was like, Can you give me an hourly rate for building websites? And it's like, we don't do it that way. If you'd like to get on a call and have a conversation about what you're trying to build, I'll quote you for the job. Oh, so you can then give me an hourly rate? No, we don't do hourly rate, we give project costs. And some people will love it, some people will hate it, and some people will be confused by why you won't do it. At the end of the day, it it for us, it's about pre-qualifying the client. If they're happy to work with us in the way we deliver, then they're pre-qualified and it will we can do it that way. Every time we've gone down the path of trying to tell it how many hours it's gonna take, and then we feel like we have to validate or the client expects us to validate what we're doing for each of those hours, it's you walk away feeling, well, I'm I'm just I'm only working for the hourly rate, and it would it's just not a good feeling. So we moved away from that a long time ago, and we feel much better.

Dave 15:57

Here's why if if if you're focused on the hourly rate in your business, why you're probably making a mistake. Because one, the biggest comeback, I guess you could say, to to somebody who's saying, Well, what's your hourly rate? What's your rate? I need to know your hourly rate, is simple as, well, let me ask you this. If I tell you that it's gonna take me 10 hours and a rate for that, and then it takes me 15, are you gonna pay me more? Are you gonna pay me the extra five hours? Well, no. Well, but why? Because you know, you wanted an hourly rate, so if it's gonna take me longer, are you gonna pay me more hours? Well, because you told me 10 hours, yeah, but things change differently. Are you gonna pay me more? No. But if I, you know, or you know, so you value your money over time. So if I can get you the project because of my experience and my knowledge, you know, in five hours, does that mean my my experience is worth less than what I'm saying the project worth? And so ultimately it comes down to really understanding, you know, you also have all of that years and years of experience and knowledge that you have to that's making you more efficient at the job that increases the value that you're providing to your clients. Every month, right? Every week, you get better at your job, which makes you more valuable to the next client that comes in, right? So you have to make sure that you're including that in your price, otherwise, you're costing yourself money. And there's so many variables that can make or break you that are sometimes even sight on scene, you know, because of processes that you're doing with your clients or or you know, benefits that you're giving them that you know you don't realize how much they're actually costing you. And so that's why it's so important when you're thinking value, you there's so many other things that go into it, not just direct costs and and and direct you know expenses that you're gonna have to pay out, but it's your experience. You know, you've put in the pain, the gain to prov to bring this prospect a solution that they need for their business. So why should you undervalue yourself? And if somebody isn't valuing you and says, Well, I just want to pay you an hourly rate, they're undervaluing you because your impact, and this is the second piece, your impact is going to be long-lasting after you're gone. So, why should you only be valued at the hours it took you to make that impact instead of you know the actual potential return that they're going to get? And so that's where you have to start shifting your mindset as a business owner to oh, wait a minute. Yeah, you're right. I have a lot of value. You know, I have a lot of time invested and service invested. I need to rethink my process. I need to think, I need to start valuing yourself before your clients and your prospects are going to value you. Once you do that, the shift is real.

Duarne 18:45

Oh, absolutely. Let's take that example you showed you talked about earlier, right? You had a session, one of the people in that session was just there, and they were saying that you know, you just the little things that you had shown them how to do in that session, that AI session, was potentially hours a day they recovered. Now, the value isn't necessarily in what you're able to charge for that session, it's the value shifted back to them. And this is something we see with our customers all the time is a beautiful website that converts into leads and contact and generates communication inbound for them, which turns into leads and potentially sales. That sort of thing is the outcome which they're looking for. It's not a website, they think it's a website until they realize the actual real purpose of the website is the outcome. And this is the same. Like, you know, people turning up at your sessions, they don't know where to start. So they think that signing up to a$20 subscription each month for an AI platform is the answer, but that's only part of it. That's like putting the key in the ignition and then not starting the car. It's like there's a lot more to it that goes with this. So one of the things that we witness all the time is when you start talking about these outcomes, don't go and the value proposition. The value proposition is not about what your value is from this, it's about what the client's value is. There could be something more time, their dream outcome, right?

Value Over Hours In Service Pricing

Dave 20:21

They they might it goes back to Alex Ramosy, right? He's got his his value equation, right? And so it's uh you know, and I'll probably butcher it, but high level dream dream outcome, right? What's the percentage likelihood that they're going to be able to achieve it, the time to get there, and then the money invested, right? And then you kind of figure out what that ratio is. And so for you to understand, the first thing you have to understand is what's our dream outcome. And if you go into an exploratory session or you go into a conversation and you don't understand that, and you're not letting them tell you that, you're wasting right that time with them because you're not able to then articulate what the value is that you're gonna be able to provide to them based on what their outcome is. It's not what you are right, what your outcome is, what you hope their outcome is gonna be. It's what's their dream outcome? How are you gonna help them get there in terms of you know reducing the perceived you know likelihood of failure and increasing the likelihood of success? And if that combined you know with the ratio of what's the investment and what's the time to get there, if that ratio is large enough, then it's gonna be a no-brainer for people to make the decision to you know kind of continue on and partner with you and go from there. However, if the perceived outcome, the perceived likelihood of success is closer to like a one-to-one ratio of investment and then time to get there, it's gonna be that much harder to sell. So if you're having trouble closing, think back to all those conversations. Are you articulating your support and your program based on what your client's outcome is, what the client's likelihood of success is, or if you've been articulating it from hey, these are the benefits of our service, here's what you're gonna get out of this, and you don't even know if it even aligns with their outcome. And so that's why this is a quite important value.

Duarne 22:52

And this is one thing like sales, no matter what training you've done in sales, it always comes down to an emotional response, and the emotional response in the most people associate with their out desired outcome is what you. Looking for, and this is where I love that neural emotional persuasion questioning. I love the simplicity of just asking the right questions to generate the thinking required from both parties to help deliver the right outcome. You know, and one of the most valuable things as a business owner you can do is qualify a person quickly that you're talking to, a lead that you're talking to quickly, because they may not be the right fit for you. You may not be able to give them the value that they want. Or maybe your value isn't what their outcome is not going to match it. And you should know that really, really quickly. So if you don't understand your own value with your services and products, and you're not asking for what their desired value outcome is, you can't decide whether you're a right the right fit or not. So it's a very, very important step. And I think a lot of businesses they miss that. When they go in to do sales and when they go in to sell their product, they miss it. And I know it's a bit of a cliche, but one of the best techniques on learning how that works is a good car salesman. A good car salesman gets you envisioning driving the vehicle, using the vehicle, picking the kids up from school, going to soccer practice, going out on the weekend for you know family dinner, those sort of things. It's about picturing that outcome that's desired for the person coming in to you purchase a product. And those simple traits can trade, they move into everything sales, regardless whether it's business to business or not. Because even if you're doing corporate business sales, there's an outcome there which is driven by an emotion. The outcome is driven by an emotion, and you've got to ask what that is. And that's typically the huge value add that you can add to the sale.

Dave 25:04

If you can still see, you know, you know, if you're doing business with clients or your customers directly instead of business to business, you know, you have to understand their right, their dream state. Like they they called you in to accomplish something, whether it's you know, demoing a project or cleaning a house or you know, developing their backyard hardscape however they want, right? And they're landscaping and they're do their yardage cut. So you have to understand what that vision is. And then once you understand that, keep them in that vision, keep them in that value. Okay, this is what we're gonna provide for you. Here's how we're gonna do it, right? Not hey, this is how many hours you're gonna get for me, this is how many hours it's gonna take. They don't again, when when your prospect is in their dream state, in that moment, they don't care how many hours it's gonna take you to get there, right? Unless it's short, right? You want to reduce that time to achieve that outcome. You want to say, hey, we're gonna be able to, oh, look at that. You know, I just said we've got fireworks. What's happening here? I don't know why there was fireworks there, I don't know what I did, but apparently, you know, our streaming software loved what I was saying. That's it. That's that's freaking hilarious. So you reduce that time, right? Keep them in that dream outcome. It's gonna make your job that much easier to close them and and get them to move forward. Now, only do this if you're honest, right? You know, I'm not saying you're trying to close them because you're just trying to get them in and get their money and then you know be poor at service, and and that's why and and it kind of goes into this to the system and and the service and and the processes. And it was funny because actually, before we jumped on, and and I wanted to kind of mention this, and I think this is a good spot for it. I saw it was a clip from uh Nick Saban. And I guess here, let me I'll play it. I saved it because I think it's gonna it's gonna be impactful in terms of you know what it says and kind of how we're what we're talking about today. But let me find it. Why are you finding it now? It's about processes, right? It's about outcomes and how outcomes are a distraction. So uh let me Evana.

Duarne 27:19

Outcomes are a distraction. Focusing on the process and what you have to do to get the outcome is the most important thing you need to do.

Dave 27:28

So essentially, you know, it's not necessarily about you getting having you know 10 more clients. If you have your process set up, the clients will come. Same thing, right? When you're talking about you know developing an outcome for a client, right? The process is the most important piece. Make sure that process is set, ready to go, and easy. And it's the outcome, the outcome happens no matter what. So focus all your attention on on the work, on the pro on the systems. That's what's going to get you to your outcomes rather than focusing on strictly your outcomes. That's just a KPI. An outcome is essentially the result of you doing all that work. And so your efforts and your focus needs to be on the work.

Duarne 28:11

And look, it's interesting. My brother has a home staging business back in Australia, and he put he put out a very clever little reel the other day. I think one of his team did it. And it was they do staging. So what they do is they stage based on how many rooms in packages. Hours never come into it. In fact, the clients don't even know how long I'm short it takes to set up and choose the furniture and set it all up in the right way, blah, blah, blah. There's a lot of work that goes into it, and again, they just want they're looking for an outcome. So he only sells outcomes. This post was brilliant. It was just a simple video of one of the rooms that set up with him and a couple of the staff in the room just looking at what they've done, and it's like, yeah, you can hire a cheap stylist, absolutely, but you can also buy sushi from the gas station. We don't recommend doing either. And I was like, Wow, what a way to say our where our value is here. Yeah, could because you instantly get a picture in your head going, well, yeah, I'm not buying gas.

Dave 29:20

Yeah, you know how many times I went to the gas station and saw sushi, I'm like, who the hell would I buy gas station sushi?

Duarne 29:25

But exactly, it's like gas station hot dogs, like, oh, do I risk it? Do I risk it?

Dave 29:32

I can say I've risked a few, a few batteries.

Duarne 29:34

I think we've all risked a few and regretted it.

Dave 29:37

Um but oh man, that's that's crazy.

Duarne 29:41

But I mean, it's a great, it's a great simple analogy of you know, just talking about showing your value without actually pushing too hard or being arrogant about it either. But every business has a value proposition, and you've got and but you've you all you gotta do is match that value proposition once you figure out what it is, and you know how you're gonna figure that out?

Dave 30:02

Your clients are gonna tell you, they're gonna tell you why they chose you, they're gonna tell you why they're working it by being quiet and letting them talk and tell themselves, and then they're gonna tell you that's how you do it. Jeremy Minor, like that that's probably been the most impactful like piece of training, you know, because obviously, if you're like me and you're just getting into business and you came from the corporate world, you probably don't have sales experience. I was never a salesman, I was in finance and accounting and leadership. Like I didn't, I didn't sell anything, I didn't have to, except I sold myself in an interview to try to get a job. That was the only kind of sales I was ever had had to do in my entire life. So I didn't know anything about sales, how to and it for a year and a half I sucked at it. I really did. I probably, you know, I I probably still am mediocre. I wouldn't say, you know, I'm not top, you know, but going through that's better than when we first met, Dave. Exactly. And so, but going through Jeremy Miners, you know, and then and learning the NEPQ and then continuing to practice it and integrating it into our processes and our systems, and then helping others integrate it in theirs, it's it's tenfold what you could potentially do as a business owner by just learning, right? And uh integrating uh the process of shutting up and listening and knowing what questions to ask when, you know. Um, and so uh it's it's crazy, and but you can't you can't be in somebody else's mind, and so the most important thing that you need to understand is that you need to understand what their dream outcome is, but how are you gonna get that? As we said, you have to shut up and you have to let them tell you, yeah, and that's it.

Duarne 31:44

And that requires the only way you're ever gonna understand it. Start with you have to start with a series of the questioning, which then you just have to shut up and listen to the answers. And people always say to me, like, Well, how do you know which questions? Well, you have two or three starter questions, and then everything else is pretty straightforward at that point. You're just carrying on the conversation, and a con the conversation.

Dave 32:06

You kind of know how the and and again, we're not gonna go into the NEBQ model here, like Jeremy Minor, go look him up, seventh level. He's got his free black book of questions, which he goes out, which I gotta say, you know, off topic here, like he's got some interesting, you know, ads lately in terms of you know, like his his I like he's got one where he's talking to a lady who's like drowning in water in a cubicle, and then he's got another one where I haven't seen that he's yeah, from from what was it, the Wolf of Wall Street, when you know he's sitting there with Matthew McConaughey and he's doing this, you know, he didn't, so he's done it, he's gotten a lot of like AI generated, but it's you know it's him, but he's in these AI scenes, right? And so it's pretty, I gotta say, he's pretty his team is pretty creative with his content around you know the black book of questions and getting it out there, but it's I would say it's it's a hundred percent like go look it up, you know. I'm now expert in it, I've gone through the training, but I I teach everybody on it in terms of what I know. But if you want a deeper level, more of that, you definitely need to go look at him. But a hundred percent just and I totally forgot where I was going before that, so I'm old.

Duarne 33:11

Yeah, it's all about questions, right? Yeah, it's about knowing how to carry on that conversation, is just knowing which questions to ask, and when you listen and get a response, you typically are gonna want to ask another in question because you're inquisitive and you can carry on a conversation pretty quickly. I think that's where you were heading with that.

Dream Outcomes And Better Sales Questions

Dave 33:30

Well, and I think so. If you understand the process of NAPQ, there's stages that you're gonna go through with your client. And the idea is that you're not asking set questions every single time to get to the end. It's here's how these questions are formulated, here's what to listen for, and then when to move to the next stage. But also here's how to probe deeper. You know, so many people, when you ask an initial question, are getting to give you a serve surface answer, you know. For quick example, you may ask a prospect, how does this make you feel that you're facing this objection or this obstacle right now? I'm frustrated and I'm angry. Frustrated? Angry? Like just doing that, repeating the emotional word back to them signals them to dive deeper and to tell you a little bit more about why they're frustrated or what they're angry about. And the beauty of that skill right there is that it goes way beyond business. I'd use that it's in personal life. You can use that same thing, whether it's a spouse, significant other, and they say, I'm feeling angry, I'm feeling overwhelmed, overwhelmed, and then they're gonna respond. I've done it and it works in text message too. You know, if somebody's like, Oh, you know, hey, I'm I'm feeling a little, you know, upset right now. Upset question mark, and then they feel compelled to dive deeper. You can do the same thing with your prospects in a prospect call. So it's it's it's crazy how once you start learning that skill and and integrating it and repeating it, how it can how it can really change your entire you know, kind of life, not just business, but life.

Duarne 35:54

Well, it's a value proposition, it's a skill that has a value for you as a business owner and as a person. Like, pretty much the only times that doesn't work for me is when I'm trying to talk to the dogs and get them to do something. They don't seem to respond as well.

Dave 36:09

Yeah, it's gonna be the same uh species. We'll go there. But they aren't persuaded by anything but treats and food, that's for sure.

Duarne 36:18

Like legit, right? It's like, come on, and if there's a fleas, well, they're a bit irritated at that point too. So get me clean. Exactly, exactly. But but isn't it crazy? I mean, when we start looking at this, it's it's not that complicated. And like I get really frustrated when I see hundreds and hundreds and hundreds and hundreds of videos on you on out on YouTube with all these gurus and coaches, and they're all trying to say you have to follow this exact formula to make this work. And it's like, well, no, you don't have to follow an exact formula, you just have to understand some of the fundamentals, and you can go and watch hundreds of videos if you want to, but probably don't have time to. So just pick a couple of people and a couple of processes and things that you think are gonna work for you and give them a try. And soon enough, you're gonna pick up what's got value for you, and then just do the same thing over and over. If it's working, just keep doing it, repeat it, refine it and improve it. Don't just feel like you have to change it. The only reason you would change your sales process is if it's not working. That's when you start looking at it, and don't change it too quick because what you might find is you're just fishing in the wrong pond. That's the other thing.

Dave 37:36

And I think too, I think it was I think it was an Alex Ramosy video, but it was really kind of eye-opening because you see, you know, people think of sales, they're like, oh my god, I closed 80%, right? Or I close 75% or 70%, whatever it is. And they think like they're they're balling, and and they're they're and maybe they are, they're making good money at that point. But here's the thing you don't want your close rate to be 70, 80, especially when a small we're a small business owner, unless one, you have a team to support them, which we've talked about before, the systems in place in order to handle those. But two, if you are closing at that rate, you're underpriced. So many people, if 80% of the people you talk to are like, yep, sign me up, right? Unless it's like a chat GPT where it's like you're it's a SAS, right? But if you're like a service where it's like there's some attention and some program that you have to offer, and 80% of the people are closing, that's because you're underpriced. It it it's it's that simple because you're you're literally giving them so much value, and it's like, oh yeah, I'm uh it okay, here's my card. You should shoot to be around 30 to 40 percent close rate. That's when you know you're ideally at the place of pricing with value is 30 to 40 percent close rate.

Duarne 38:48

The other thing to add to that too, though, Dave, is if you're at 80 percent, how many conversations are you actually having? Because uh you know that's the other flip side of that. If you're only having three conversations a week and you're closing two of the three sales, that's a great success rate. But what would happen if you move that to 10 conversations? Would that still be two sales?

Dave 39:13

Would you have the capacity rate?

Duarne 39:14

Or exactly so I mean you've got to be you there's there's different metrics you have to be measuring here. And we I think last week we talked about capacity, and the week before we talked about processes and things like that. All of these things have their place in the process of getting the sales, but today, from a value and a positioning point of view, you really just need to understand what your capability is as well, because that's another part you can play into your value is scarcity, right?

Dave 39:47

So then that that also plays into the second part of our conversation, which is pricing. Because you know, if you're a small business owner and you're a service, and a lot of the stuff does require a lot of your time to provide and you know do the service, you can't maintain an 80% close rate. Like as your time gets more limited because you have more clients, those clients then need to be brought on at a higher rate for you to grow. Because ultimately, year over year, if you keep your price, and I believe I said that, I think it was if you've kept the same price, and I put this post out a few months ago on your but if you've kept your same price over the last, I think it's five years, because I did it in 25 from COVID, right? So if your price is the same as it was from COVID, or maybe you've only done one price shift, you know, inflation has gone up like 30% something around roughly from 2020 to 2025. So if your pricing is the same, you've actually effectively given yourself a pay cut of that same 20-ish percent of your buying power out in the market. And that's assuming that none of your other, you're right, you know, maybe your margin's still the same. Hopefully, your margin's still the same on that, which means your your cost of goods haven't gone up, it's just you. Yeah, do you want to be doing the same work five years later for the same for less buying power, essentially a pay cut? So this is interesting. That's level one.

Duarne 41:17

How many times have you spoken to a client and they've said to you, Yeah, but our customers have been with us for five years. I don't want to lift out price, maybe they'll leave. And at that point, you have it's that conversation as a business owner you have to have with yourself going, Well, are they staying because it's cheap, or are they staying because they do a really good job and I provide a really good service? One of my clients, prime example, didn't raise his monthly service fee for three years because he was asked to defer it for two. And then something happened in the third year. He went back to try and get that rate increased, well, not try, but actually increase the rate this year. And when he reminded them that they asked to kick the price down the road a little bit for a couple of years, they were like, Yeah, but we're talking about the price right now. So he's trying to take it. Everybody wants a deal, everybody, yeah, everybody wants a cheap. Exactly, right? He's trying to get them up by about 20 bucks a month per user each, right? And they've come back with a counter of seven dollars. Oh, geez. Yeah, so he's like, Oh shoot. Now he's gonna meet them somewhere in the middle and he's gonna close there. That's probably gonna be okay. Is he gonna do that for the same level of service? Well, this is the thing. One of the reasons that he put in that offer for a 20 extra was because he increased his level of service. He put a value extra value proposition on top. They took that value proposition and then low-balled him on a price. I pushed back and said, Well, you should go back and say we'll do it at this price, but this doesn't come with it anymore.

Dave 42:58

Right. Well, and and that ultimately what I do, right, is figure out, and this is important for you if you're listening and you're you're like, how do I increase my price? So, one, if the same level of service that you're providing needs to be a higher price, you you go to them and you, you know, and we've talked about what to do in a price change, right? You figure out the medium that you need to do, whether it's one-to-one phone call, email, announcement on a platform, you know, and it depends on the type of relationship you have with your client. So if it's more personal relationship, right, it wants to be, you know, like in person, especially if they're local, take them to lunch, have the conversation, you know, give them a call. If it's more, you know, they're they're across you know everywhere, maybe do a video call. If it's something where you know maybe you're not meeting with them on a regular basis, an email is fine. If it's a SaaS, right, you can probably just put the pricing announcement, pricing change across the platform, right? However, in in this case, is a prime example of you know, we want to increase our price for this package, and we're adding this extra layer of service to that package. This is the new price. And what I would suggest to a lot of people is you would go and say, you know, based on your package where you're at, right? We're we're grandfathering this old package out as of XYZ date. This is the new package that is equivalent. However, you also get A, B, and C of extra service in this new package as we're updating our program and our service. The new price is gonna be about$20 more a month. In their case, you know, they're gonna come back and oh, we we have funding for$7 more a month. Okay, well, this is the lower level package, which is actually only$5 or more than what you're already paying. However, you're not getting X, Y, and Z from the package, and you're also gonna lose right this service that you're already receiving, you know, and so what that means makes them choose is one, now it's not a negotiation, it's here's the two things that we are now offering. Which one do you feel is gonna best support you and your business?

Duarne 44:59

Which outcome do you want?

Dave 45:02

And and it's ultimately, and what I would do is really take away something that they're already receiving in that lower level package, and there should be because it's a lower level package, they shouldn't get their same service for a lower increase, and that's gonna kind of force them to make the decision of was this vital to us that we were getting, you know, the piece of that that they're taking away, and or is what they're adding in way more valuable to us and going to help us, you know, achieve our outcome and our and our goals. And that's when you're doing a price conversation, is those added values that you're adding into your package and your service, you should know your clients very well that it's going to help them do more. More often than not, it's something that you've already been sort of maybe briefly giving them access to as your current level, as you're rolling out something new, and now you're adding it in, and they're already going to see. That sort of value of like, oh, I get this now on a regular basis instead of like one off.

Duarne 45:55

Solving a pain point that we which you're aware of, or something like that. And this and you're right there. It's a common, it's a common thing that gets overlooked. Instantly it's like, oh no, I can't provide that level of service at that price. Well, don't provide that. You're devaluing what your solution is. Provide a solution at the value proposition that matches what they're willing to pay.

unknown 46:17

Yep.

Duarne 46:17

Happy meaning.

Dave 46:18

Remember what we we said earlier in this conversation is every year your value goes up and up and up because you're more one, you're more efficient, you're more knowledge, you're more experienced. You can you've done a lot more experience in that industry, your value is now higher month over month, year over year. So if you're keeping your price the same year over year, you're devaluing yourself. The clients aren't devaluing you, you're devaluing yourself because you're not going through that process of reviewing your pricing and updating your pricing. I would say at a minimum every year. But sometimes, depending on your your costs, you know, depending on what sort of industry you're in, you know, this could be you know quarterly, semi-annually. It needs to be done.

unknown 47:01

Yeah.

Duarne 47:02

And so when we think of pricing, go ahead, go ahead. Sorry, sorry. The same thing goes. Like one of the things I put together today was a documentation for a deal I was working with with a client, and it was related to outsource staffing. And one of the things that we were working on is I asked HR for some documentation on how we work out evaluations based on increases for annual increase for staffing. And I'm looking at this and I'm like, explain the numbers. And it was described that a previous employee who worked for us and held the role of HR manager six, seven years ago used this and it came from a retail industry. And one thing that was really glaringly obvious to me was the longer tenure that this that people with you felt it was okay to reduce the increase percentage significantly to the point where if you had been with us for one year, the increase was three times more that you were potentially capable of earning than in month in year five. And I'm like, well, so why are we not re but that's not how we work? We actually reward, we generally pay about the same every year. And what I realized is this is exactly the same scenario when we give clients a price, and then five years later, we're like, well, hang on, we've been increasing all the staff salaries that deliver the services to you. All of our costs have gone up, we've added extra value in. It makes sense that we should be increasing these things. We factor it into contracts now. Our contracts are written for 12-month annual cycles, with written in that we will be increasing by a minimum of X percentage per year. It's written based on a performance level matrix evaluation, and and that's pretty much written into the contracts now. And the reason we did that was because we set expectations with people because what would happen is when you go back and say, look, we're gonna be increasing the contract by 10% this year. Oh, that's a big increase. Well, in the contract, it actually states 15%. We're only gonna be increasing it by 10 for you. Oh, does it? Oh, that's great then. Thanks for that.

Dave 49:22

It's a much better pill to much easier for sure.

Duarne 49:27

Exactly. It's like okay, cool.

Price Increases Without Losing Clients

Dave 49:29

When you think about it, yeah, when you think like 10% is not you're not making bucku dollars off a 10% price increase for people because essentially, more often than not, everybody else that you're bringing in, like if your staff salaries went up, let's say three, four, even five percent, well, now your taxes also went up. So that's another you know, kind of dollar, you know, out of out of that pocket. And in Philippines, right, you actually have to put up away, you know. I don't know what we don't have that here, right? You get that whole 13-month salary as a benefit, right? So it's like you have this whole extra month that you have to pay people for, you know, as as sort of like a year-end bonus that everybody gets built in, you know, and so your costs are going so 10%, and you have to understand this, like especially if you're in business, you should be the ones that should understand this the most. Because if somebody's saying, hey, my cost is gonna go up, and they're supportive of you and they've helped you gotten somewhere, stop arguing with them unless it's really asinine. Okay, I get it. Like if they're saying, hey, my prices go up 100%, what? Like, what's changing? Oh, no, nothing. I'm just doubling my price. Okay, now you can push back. But if they're saying, like, hey, I gotta we our price has got to go up 10-15% this year, what does that look like? Great. Like, don't push back, understand it as long as they're value. Like, hey, our costs are going up, we got you know, inflation, everything that's going on in the world, we gotta increase our price. Great, everybody's gotta increase our price. Perfect. Don't push back. So if you want, and I guess this is if you expect to get a price increase, stop telling everybody that you're not gonna agree with the price increase. What you put out in the world is what you're gonna get back. So if you if you actually understand it and and and work with people and say, Oh, yeah, like let's make it work. Like, I know you're you're you're an added value to my business, here it is, you know. And then you want to turn around and expect somebody else to give you a price increase.

Duarne 51:26

Give yourself, even you as the business owner, don't overlook yourself. This is one of the things you talk about in cash flow, right? Is making sure that you actually give yourself an increase occasionally as well. Because if you're still earning the same amount that you were earning three years ago, you're making less money than you were three years ago, and that's not good for anyone either. So stop undervaluing yourself in this and understand that you know you can you can ask for more from a client with these increases as long as you can demonstrate value. And you might think, oh, yeah, but I'm doing half the work now because I've got tools that make it easier, and I'm capable of doing that because I've got the experience in doing that now. Then we go back to the outcome value proposition that we were talking about before, not the hourly rate proposition, right?

Dave 52:20

Right, and and you're focused on what value you're bringing to your clients just because again, just because you're more efficient at doing and providing that outcome, why should you be penalized for that? Like you've taken the time to invest your own time to make that process to generate those workflows that make that outcome available to your client. You don't want to work with me, great, but you're not gonna get the outcome. And I think you know, the one thing to look at long term is stop doing these three-year contracts or these price, you know, price locks. Yeah, I think it was the big thing that I heard from what you were just saying, too, is you should never have a price lock more than 12 months, and just say after the 12 months, it's gonna, you know, we reserve the right to increase pricing, however, every year it you know it'll be maxed out at X percent. And then, as you said, you don't necessarily have to go that percentage every time if you don't need to, but it's already there, and that's why it's so important to have agreements and all that stuff in place, which we talked about again, and we will that's next episode is agreements and contracts and why you need to have them as a business, even if you don't want to lock people in, why it's still important to have an agreement with them. And so when I think of pricing, and everybody's like, Well, what do I charge in terms of like price to you know investment and and and all of this? And and how do I know I'm I'm I'm priced right? And so before the the Golder ratio was roughly around like three to one, you know, of pricing to costs, typically where you wanted to be. However, that ratio is more, and if we think of, and this was the ratio, the Golder ratio around like lifetime value to acquisition for a client, golden ratio minimum is three to one. However, that's if that process is completely automated, so it requires no human interaction, right? So you built the system, you built the workflow, so you know the cost of acquisition leads right into you know an automated workflow, automated follow-up, no sales call whatsoever, right? They they they're invested in whatever that you're providing. That's your three to one. Now, as you integrate more human action interaction, you have to increase that ratio and expectation higher. So, with if there's the entire process is human, you you want to have something 12, 13, 14 to 1 because you have all those back-end costs that aren't considered part of your acquisition costs. You know, your acquisition costs are your marketing dollar spend, right? But you have all these other costs that go along with it from your operating side, and so that's why you want to have this 12, 13, 14 to 1 ratio when you have the entire process human. And then as you kind of integrate AI in the process, you can shoot for you know, maybe a five to one ratio or an eight to one ratio, depending on how many steps are in your process. And this is why, as a business, one scenario is not the same for everybody. You know, we can talk generalities, but in reality, in your business, right? You're watching this, your business, you have to map out that process. You have to map out what are my sales steps, what's automated, what's human interaction, and then from there, okay, well, this is the ratio then that I should be shooting for. And this is what and you have to map that out, but so many people don't. You know, you right now, if you're watching you're watching live or the replay, you know, we can see who's watching. Think of your sales process. Can you tell me right now, put in the comments right now? Tell me in the comments, and I can see the comments, how many steps are in your sales process. Put in the comments right now. If you're you know, I can see the ones watching, or if you're watching the replay, put in the comments how many steps are in your sales process, and then how many of those are AI or automated versus requires a human touch. If you're a business owner, drop it. Because I think that's important for you to realize. And if you can't, because you don't know, well, this is your homework for today, would be to go map out your sales process so you can understand what is the ratio that I need to actually be successful in my marketing, in my sales, in my acquisition of new clients. That's where you need to, that's gonna be the first driving factor of your pricing. But yeah, and it's been called civilizers.

Duarne 56:51

We've got a lot like I've spoken to a bunch of clients and stuff in the past, and they go like they're builders or their contractors, and they'll go out after tenders. And as we all know, tenders take a long time to put together, they have a high rate of not being successful. So, what tends to happen is when they're going in doing these tender processes, they spend a lot they invest a lot of time. And when they don't win one, they tend to give up. And that whole process, that's a sales cycle which requires you to be in there playing all the time. You need to be in there. So if your entire business model is designed around getting like tenders and trying to win these tenders because they're so great.

Dave 57:37

When you say tenders, so just because it's language, yeah, that's like estimates, right? Giving a proposal, that's our process over here in the US.

Duarne 57:45

If you have to do a lot of proposals, kind of it's a little bit a little bit different to that. It's like when you're invited to quote on a particular job, it's a very specific process.

Dave 57:53

So it's like an R RFP over here, like an actual class four proposal requests. Yep, yep.

Duarne 57:59

That would be it. So those jobs are typically they're very they're a very tedious process to do. Now, a lot of lucrative contracts can be won from those, but you need to make sure you balance that process out. And this is where you have to be smart with your sales process. You need to know if I'm gonna do for every one tender that I do, I need to do 10 regular proposals out to clients for their different jobs that are not that I've got a high rate of winning as well. And you're not relying on just that one. And all of this comes down to just making sure you understand what your sales process is, what it looks like, what your real investment is. Like I said, I said right at the beginning of today, like if it wasn't for AI, I probably would turn clients away on certain projects because it takes too long to put documentation together for them. They've got too many requests and requirements and upfront demands to make a decision. Now, if I was offering a cookie-cutter solution, which was just here's my collateral, thank you very much. Read it. If you're happy, we'll have a conversation, we'll sign a contract. Thank you. But when you start talking about fully customized solutions like staffing, marketing strategies and plans, websites, these things require a little bit more forethought, a little bit more action. And a lot of the stuff we do is all white label, partnership related. So that takes a little bit of relationship building and back and forth negotiation at the beginning. And we factor that in. But then we look at long-term, once those relationships are in place, that could actually mean three, four, five very quick, easy sales every month. Because we're not doing all the we're not doing as much of the groundwork. It's coming in as heavily referred, and we're able to get those deals signed quicker. So you've got to work out what your sales process is. You've got to work out what your value proposition of doing that, so going through that sales process, and your sales process might not be a linear as some, it may actually require you to jump around and do different things. And you may have a sales process that can't use AI because you've got to go to physical to site, you've got to physically go out, take photos, videos, whatever that looks like.

Sales Process Steps And Pricing Ratios

Dave 1:00:06

And so that's that's like part one of I mean, pricing is so intricate, and there's so many different like KPIs or parts of your business finance world that point to you're underpriced. Okay. Now, I had this conversation a couple weeks ago with a remodeler, and this comes down to your margin on pricing. You know, so as you're a remodeler, your biggest thing is understanding what are all the things I'm gonna have to buy in terms of supplies, hardware, you know, new cabinets, whatever, that's a flooring, anything like that, right? So you have all these hard costs that go into that project, they have all these subcontractor costs, all this stuff. And then you have to build your margin on top of that. Now that calculation is very important, okay. If if you get anything from this episode, this and and you're calculating, you know, because you have a hard cost, and then you want to call calculate and get the right margin. This is your takeaway, okay? Don't add all your costs together, you know, both hard costs, labor costs, you know, in extra insurance costs, depending on the job, you know, all those other costs that go into it. And then don't just take that number and say, okay, my margin 20%. Well, one that's way too low for a gross profit margin on a job like that. Minimum, you should be at 40% to be viable. Minimum is 40%. But don't just take that number and multiply it by 40% and then add that on and then invoice for that number. So, for example, let's give this let's just quick calculation here. So let's say that you have$10,000 of direct cost and you want a 40% margin. Okay. Easy math,$4,000. You're like, oh, I'm gonna invoice$14,000. Okay, great. However, if you take that$4,000 and then you divide that by the$14,000 invoice that you just sent, your gross margin is only 28.5%. And you you're wondering, why aren't I why I I do 40% for everything? Why aren't I getting a 40% margin? Why is it only coming in at like 28, 29? Well, because your calculation's wrong. How you actually calculate your gross profit based off of your costs is you're gonna take that 10,000, okay, and then you're gonna divide it by one minus the gross profit margin that you want in in decimal format. So in this case, if you want a 40% margin, you're gonna divide the 10,000 by one minus 0.4, which is 0.6. So when I divide it by 0.6, now my invoice is$16,666.66. Okay, a difference of$2,600 in invoice to get the 40%. But if I subtract my$10,000 of cost, my gross profit,$6,666, divide that by$16,667, you know, roughly. And then that gives me 39.99, 40%. So so many times I've had this conversation with owners who are like, I can't hit my margin. I do it, or I'm calculating it, cost times 40%, adding it, and my margin comes in lower. Your calculation's wrong. I've never heard that is going to fix your business. If you take anything away from today's conversation, this one calculation of actually fixing your gross profit is going to make you more profitable from anything else. And if that's the case, then you owe me by coming back here, me and Darren coming back here, liking this video, and sharing it. Because that one piece of information should make you thousands and thousands and thousands of dollars if you're doing it correctly this month and next month and then a month after. That piece of information right there, how you calculate your gross profit margin, is going to make you thousands of dollars from this month forward. And if it doesn't, you're probably not selling anything.

Duarne 1:04:21

So I hope you take that away. That is really clever. I had not actually ever like I knew that that was a case of dropping the margins. I didn't know that that was how you calculated it. That is so it's actually quite simple and elegant in the way it's done, but it's so effective. Like you just demonstrated that's a 2,000 plus increase. And when you start taking into consideration things like that 28.5% you're originally talking about, you're gonna lose whatever the transactional bank fees are. That's an extra couple of percent. You're gonna then have to pay tax, so you're gonna lose a little bit more on that when you do the tax component of that.

Dave 1:04:58

And so this is what this is how I explain it as well, right? If somebody says, Well, I want to do 20%, I need 20% gross profit margin because it's the only way if if you're a remodel, you're in a service business. You're saying I need 20% because that's pretty much the industry standard, and it's how I lock in on my jobs, it's how I get all my jobs. Well, one, you're not at 20% if that if you're doing it the old way, you're at like 15%, anyways, which is you know costing you money. However, the my my follow-up question to that is well, what what do you want your net profit to be? Like, what's your your ideal net profit? And they're like, Well, I maybe 20%, you know, 15, 20. Okay. So if you're at 20% gross profit, how do you expect to have 20% net profit? Because you have operating costs, all those other things we just talked about. And then that that's the eye-opening moment right there. It's like if you have 20% gross and you want even 10% net, that leaves you only 10% of operating your business in terms of admin staff, you know, processing fees, insurance costs. And then that that's the eye-opening moment for so many business owners because it's like, oh, well, no wonder why I can never get to a 10-15% margin, because I'm only shooting for a 20% gross profit margin. Yeah, you're right. That's why you have to shoot for a minimum of 40, because then it gives you the room to actually operate your business. Because if you don't give yourself the room to operate your business, you're never going to be profitable. No matter what, and you can't make the system.

Duarne 1:06:30

And you can't make decisions when shit it's the fan. Like if you need to shift and pivot in the middle of a job and you don't feel and your contract's written in such a way you can't go and charge the client because it's fallen on you to be the problem, you can't make those adjustments and changes.

unknown 1:06:44

Right.

Duarne 1:06:45

You know, you might have an accident. If you're doing refitting, it could be a marble top that's been dropped by one of your team. What are you gonna do? You can't, yeah, you can try and take it up with the uh supplier, but you can't install it. You're gonna have to replace it, it's a cost to the job. You don't have the margin. And if you're working and any extra margin you can build into that, 100% you should try. So I love what I did not know that little simple piece of math.

Dave 1:07:07

That's very clear. Yeah, so if you're taking anything away from today's episode, that's what that's I it's a good ending spot in terms of pricing. I there's so much more we can do, however, like this is an hour show, roughly, and we can't go into all of it. There's so many, and it's all and it's also nuanced for your situation, your business, your ideal client profile, all of that. It's it's definitely nuanced. And so my takeaway for you is that one thing that I just showed you, you can take that into any industry, any anywhere, and that same simple calculation is going to make you thousands of dollars and correct your margins if you can't figure it out. I had that conversation with a remodeler who's been in business, you know. 10 years and he was using the same old spreadsheet and he couldn't figure it out because nobody taught him. I showed him that he corrected his spreadsheet, like, oh my god, this is gonna be a game changer. You're right. Because you're going from you know a 20, which is actually more like 14-ish when you actually do the calculation, to actually getting 40. That's gonna be of course that's a game change. That's thousands and thousands and thousands of dollars on every job. And if you're a client, right, or maybe you're a customer and you're like, Well, why would they be getting 40? Why should I pay so much? Again, because otherwise they wouldn't be in business. You know, it's it's not you know, on that, and this is where so many people who aren't in business they don't get it. They're like, Well yeah, okay, he's making 40 on you know, a hundred thousand dollar job, he's making forty thousand dollars. And I no, he's not. No, he's not because he's got operating costs, or she's not as well. You know, don't want to discriminate here. They got insurance costs, labor costs, admin costs, taxes. But at the end of the day, that forty thousand dollars of what you think is profit probably turns into maybe 10 or 15, and that's his time for and for his risk and his investment and his you know stress or or their you know her stress of running that business. You don't think that's worth it? You know, what if what if you went into work and your boss told you at your job, you know what? I think I think uh you know you're making too much money on the time that you spend here. You know, we want to cut that down a little bit. Yeah, wouldn't you feel like shit? Yeah, that's basically what you tell a business owner when you say, you know what, I don't think you should make that much profit, or you know, you make$40,000, you make 40%. Like, what the hell? What do you how do you what are you doing with all that money? Sorry, but maybe you shouldn't stick your nose where you don't understand it. Maybe seek to understand first and then have an opinion. But you know, it's human nature as a business owner.

Duarne 1:09:43

You tend to find you walk into places and you start recognizing stuff like holy shit, this is like a lot of square footage. This place is not cheap. That's a lot in the rent. Look at the lights. Wow, that's a lot to power this place.

SPEAKER_02 1:09:57

What's the thing?

The Gross Margin Formula Most Miss

Dave 1:09:59

I've looked at real estate space and I'm like, man, they're probably paying like 10 grand a month in real estate. And then you look like how are they staying?

Duarne 1:10:08

How are you staying in business? There's like nobody here. My favorite is I look at light shops, right? Like they got shops that just sell lighting, you know, chandeliers, lamps, all that sort of stuff, right? And I'm like, they're huge shops. And I'm like, how many lights are they selling to make enough money to keep that place open? Like, seriously, and they have to power all those lights to demonstrate them all the time.

Dave 1:10:31

And when you and when you think of that, right? It's because as the consumer, the customer, like the the daily person you and I, that's not their that's not their clientele. Their clientele are real estate commercial. They need a showroom so that they can come and like see all that stuff. But their ideal is like these big high-rises, these big office buildings. That's that's their ideal client for that. And another thing about and I'll share this too, which is over here, it it's really fascinating and interesting. Long story short, but there's what I have mattress firm, right? So it's a mattress sales spot, and you saw them, you see them everywhere, right? And it's like there may be one on like opposite blocks, but yet nobody's are in it. It's like, how is this place uh alive? Like, how are they so successful? And here's the play for them, which is why it's a little bit different. For them, they go into these newer developed real estate spots and they lock in a like a 20-year lease with these places at a really low rate, okay? And then once they lease it out, and the landlord comes back to them and say, Hey, we need to renegotiate your lease. Well, nah, I'm sorry, like I'll sublease it to somebody else, and maybe we'll split the difference. But yeah, I'm I'm locked in here, right? And to hold that, they become now like these land mass, you know, they they get all these different you know commercial buildings under under contract, and that's what they're doing because in order to pay for it, they only have to sell one or two mattresses a month to pay their rent, and then their their money is in the back end when in five years that landlord wants to get out of that contract. Oh, you can pay us, you you can pay us to get out of this and to get it back, or let us sublease it and we'll sublease it for you. Yeah, and so that's an interesting one when you see that kind of stuff, because there are some of these so there's some of these things that you just don't understand.

Duarne 1:12:26

Like in that case, we're like I remember I sat with an owner, I sat with a restaurant owner during just after the COVID period, and he said it was really tough. Didn't he didn't let any staff go? He managed to keep them going for 18 months during 12 months of closures and 18 months of very restricted hours. And I said to him, I said, How are you keeping things going? And he's I said, You can't be that busy. No, we're not. We've got maybe a couple of people at a time in here. That's it. And I'm like, he goes, but we've got a wholesale business which actually produces all of these meats and small and meat goods and hams and curing the sausages and cheeses. And I'm like, oh, and we've got contracts with all these big supermarkets that are now supplying everybody because there's no restaurants open. So our sales are actually up because of that.

Dave 1:13:21

And I'm like, oh my god, that's the that's the key right there. We'll end with that because that's a good one, right? And it's sometimes in business you have to think outside the box. Yeah, you know, and the other example of that that I that always stands out to me, and we've talked about it on this show a lot, right? Is the Savannah Bananas, right? During COVID, another COVID example, right? They're a baseball team, right? When they're just kind of getting up and started, you know, they had this, they turned into like drive-through experiences during COVID, you know, and they had one of their most profitable years because of that. But they're a baseball team, a baseball organization. And it's like, how did you make money during COVID when nobody was in in stadiums or anything like that? And because you thought that they thought outside the box, and so sometimes you have to think of that too. And so, with that, I already told you what I want everybody to take away, and that's that calculation for gross profit. And if you missed it, go back to it. I'm sure I'll share it as a clip as well, somewhere here or there. But Duarn, what do you want the listener, the viewer to walk away from today's episode with and start implementing this week?

Duarne 1:14:27

Well, I think really understand what your real costs are and what your value proposition is. Once you understand that, you're in a much better position to go and ask the questions and listen for the signals as to how well you can offer a solution that hits the value proposition that your client wants. Right. And until you understand that yourself for yourself and your business, you're not going to be able to be very good at offering that to your clients. And so practice learning all of that information within your own business. It won't take that long. You'll probably already know all this. You just want to create the processes and document this out so you can feel it. Run your calculation. Now you know that. And make sure you're actually getting value for what you're doing. Make sure that you know you're able to demonstrate the value proposition to your you know ICP and make sure you're positioning correctly what your value propositions are to them and matching it to their perceived outcomes. And if you can do that, you're gonna do pretty well. And sales are only gonna get more if you actually get on the phone more or get out and pay hit the pavement more. You know, they don't just magically turn up, and if they do suddenly start turning up magically, it's gonna dry up at some point. So be ready with a plan for when that happens as well.

Final Takeaways And Share Request

Dave 1:15:52

I agree. I appreciate it. So if you're here, we appreciate you being here as well. I hope you got something out of today's episode. If you're watching live or if you're watching the recording, I'm great at 2x speed. So I love listening to that. But you can listen to this 2x speed. Also, we are on Apple, you know, podcasts, all that fun stuff. So if you want the audio version as well, if you're listening to us there, we appreciate you as just as much as listening to us live. So I hope you guys have a wonderful and amazing rest of your day. If there is something that you got out of today's episode, please like, share it, do all that fun algorithmic stuff, and share it with your network because somebody that you know that's connected with you is probably a business owner who may need to hear this. So we appreciate you. We're on a mission to service and support a thousand business owners by the end of 2028. We're well on the way to that goal, so help us achieve that goal. We appreciate it. And we hope you guys have a wonderful and amazing week. Until then, we'll see you. We'll definitely see you guys in the next one. Hope you have a good one. Take care, guys. Thanks.