Make More Profit than 99% of People

if you want to make more profit than 99% of businesses you need to nail pricing optimizing pricing has a six times stronger increase on profitability than getting more customers and two times stronger increase of profitability than decreasing churn or getting people to buy more times and it is the strongest way for businesses to make more money and so in this video I will walk you through on each page that I turn A New Concept that you can apply to your business that will make it more profitable via price if you don't know who I am my name is Alex rosi I own acquisition. it's a portfol of company over $200 million a year and these videos are to help you show what we do to grow our portfolio so that you can make lots of money and then maybe someday we can invest in your company otherwise enjoy I take a weekly call with a school uh communities in the school group and uh I had like three or four guys who asked me questions that I was like these are not like Alex questions these are math questions that you can just simply solve by doing math and so it's like should I do this price or this price price it's like well what's the conversion of this one versus this one and then what's LTV on this one right it's just you just solve the math problem and I think a lot of businesses are not using math to solve their problems and with pricing being one of the largest levers for making money not one of it is the largest compared to getting more customers uh increasing uh how many times people buy and uh and pricing pricing is still a three times stronger lever on profit versus the other two so let's talk about five concepts of pricing that will make you more money all right so the first one is something that I like to call the price Dev value discrepancy all right and so if we imagine here as the value this little first Red Line This is the value that the person gets this is our price assuming that our price doesn't change over time now if our price doesn't change and the value does when will people cancel here when the price and the value were matched or when it's underneath and this is our sad face as business owners because we're like oh my God I thought that I was making all this money and so the thing is is that there's a third line here that is probably worth understanding and this is our cost line so ideally you want your cost to be here your price to be here so this is your profit and then over here this is your something called customer Surplus uh which is just a fancy word of saying Goodwill or the value that people are getting net of the price right so ideally you have really high value you've got a price that's still high relative to your cost basis as a business owner and so this is the fundamentals of pricing individual now one of the things that I see as a mistake is how does this occur how do we go from having lots of value to not having lots of value well let me explain so with onetime value versus consumable value which is I like to think about it all right so the reason that you have those big discrepancies is that usually you don't don't understand the value that you are delivering to a customer meaning if I say hey let me give you this course on you know building websites whatever right then as soon as you learn how to build websites the value of that course drops to zero you already have the skill like the day before you needed to learn how to do arithmetic arithmetic is super valuable the day after you learn it it has zero additional value now that doesn't ract from what the initial value was it just no longer has value and so what most business owners should do but don't do so this is me telling you that you might want to think about this is differentiating the value that you have in your business between one time and consumable or recurring value all right so let me explain so let's say I uh let's let's let's use that example the websites so my little my little course right on website building is something that would be one one time value once you have it that's it there's there's nothing else but what are all the things that I might have in my business for website building that someone is going to consume this month and next month and the month after I might have a community that's associated of people who are trying to build Pages that's something that I'll use this month and next month I might have accountability if I have somebody who's going to help me build it right accountability SL support that's something that I'll use this month and next month right I'll have access to those things what else would I use probably website servers to host my site right I'd probably use software to host my site I'd probably what else would I use um I might want ads help right that I would use on a monthly basis to help optimize my ads right and so the big thing here is that we have to look at the services we provide and this is especially true with education people because they have lots of one time value and very low recurring value is thinking am I pricing these things appropriately so hear me out I think that a superior pricing model better matches the price to Value discrepancy that you're shooting for on a regular basis so it would make sense for me to charge more here right my price to be higher here and then it would make sense for my price to be lower over here so I continue to have this Delta all the way through right and so the question is how do you accomplish something like that well what you do is you have something called a startup or a one-time fee which is associated with the thing that has onetime value and then you have a lower consumable or recurring billing thing that's associated with the consumable recurring value and this is fundamentally why I think there's so much churn in the media or education or information space is because people don't differentiate between those things but your customers sure do and so the customer says well you want me to pay $1,000 a month for this course but I already learned how to do this and you want me to keep paying for it for 12 months even though I already went through it now you might make the argument well it's worth $122,000 but you know what as far as they're concerned today it's worth nothing and so this is why I like having this this perception of I have a one-time payment up front that's higher and then I have a smaller payment that is done every month that reflects a price to Value discrepancy on these recurring consumable things now one of the things that people have a hard time with is realizing that this is significantly less valuable than this and so what happens is is that this might have to be $5,000 and this might be $300 per month or $200 per month and that's okay and so making sure that that price Dev value discrepancy matches will allow you to have really long LTV on the side and so in so doing get way more LTV overall because people don't leave and if people don't leave they keep paying if they keep paying you keep making money okay now that is the onetime value versus consumable valuable uh concept this is the big head long tail which I talk about in my offers book um in more depth and I think a lot of businesses are going to start switching to it they already are the way that this is done in the infos space is people sell a course and then they have continuity or community on the back end um and you sell it as one thing but the they're just priced differently so you pay $5,000 today but then you pay x per month over time okay now if you were to switch to something like this let me walk you through something that blew my mind that might blow yours as well so profit well did a really cool study on this which showed the difference between monthly billing quarterly billing and annual billing now you're like okay well what's the point who cares well you should care let me show you why so if you build monthly the average turn across all memberships is about 10. 7% per month that means if you have 100 people you're going to have 89 at the end of the next month all right if you Bill quarterly that churn drops to 5% okay less than half literally simply by changing the billing Cadence now what happens if you Bill annually it drops all the way to 2% now you're like okay that doesn't seem like a very big difference but let me show you how big of a difference this really is so we can determine LTV by taking price and by the way you all wanted more real business [ __ ] this is real business [ __ ] okay so you take price and you divide by churn and this gives you your back of napkin LTV all right meaning lifetime value how much Somebody's Worth over time and so that means that if my price is $100 all right $100 and we'll use that for all three of these examples per month right now if it's $100 per month here I'm billing monthly here I'm billing $300 every quarter here I'm billing uh $1,200 per year all right just to be clear now these turn rates R are extrapolated back out to monthly so if I have 10.

7% churn 10. 7 then it means that my LTV is somewhere in the near but of like 950 bucks somewhere in there okay now if I have 5% churn my LTV is now $2,000 if I have 2% churn my LTV is $5,000 wow so we went from 950 to 5,000 just by changing the Cadence that we built if you're listening to this and you're like wait a second if I made five times the money per customer guess what that would do to my business you bet it would 5x your business then you're like okay well I'm going to do this tomorrow not so fast there you know fast Fred let's talk about the other side of this two things real quick one if you like this stuff uh the question that I was citing at the very beginning of this was from a school uh Q&A that I do so if you're getting into business you want to start a business you can join the school games3 % of people make their first dollar online very proud of that um if they finish the first month of the school game so pretty cool there if you already are a business owner and you like this more in-depth stuff in terms of like scaling the companies uh and increasing profit and eida uh we have workshops that we just started uh offering at acquisition. comom at our headquarters in Vegas um and so if you want to see if you qualify for one of those uh you can go to acquisition.