It's Boring, But It Will Make Even Beginners More Money

Do you understand rich people? This is really, really critical in my mind for service businesses and so underutilized. Nine out of 10 small businesses under charge.

When was the last time you raised your prices? Sell expensive things to people who can afford them. I'm going to tell you how to make any of these make sense to you so you can apply it to your business and your life right [Music] afterwards.

This is the Big Deal podcast and I'm Cody Sanchez. Welcome back. Today we're talking to you builders about how to make more money.

I call this the sell things to rich people, they pay more. And I know that's true and it's cute, but is it so easy? Having sold clients who are both not so rich and rich, there is a truth to this meme, which I want to read to you.

You can see it here. It says, "$500 client. I just feel as though with this investment I'm about to make in you that you should understand how our lives are about to change and I need results and you need to bring them.

And I'm entrusting you with our livelihood and lives. $50,000 client. Money sent.

Thanks. Anybody who's been in business kind of chuckles at this, except it's true. Now, here's why I understand the $500 client.

You have to remember that they need that $500 to do something for them. They actually have a visceral need. That might be what's called last dollar for them.

They need the return on that dollar to be so significant that they hold you to a level that is actually irrational. And so, you don't want to just sell things to rich people because you're greedy. You want to sell things to rich people, maybe even because you're not the best to begin with.

In order to sell things to people who don't have a lot of money, you have to sell a huge amount of volume to be able to live. Volume is hard to get when you're not a very good operator. So, rich people want you to sell them something.

Remember that and use it to your advantage. There are two worlds of entrepreneurships. One world scraps selling cheap products to price sensitive customers who turn the moment they find a discount.

In the second world sell fewer better things for more money. That volume game can work. It's built some of the biggest business empires out there.

Walmart, Amazon, McDonald's. Three small issues though. The game is brutally competitive.

It requires you to be airtight in your operations and infrastructure and even the best eventually move into higher margin products. So, a different path. Sell expensive things to people who can afford them.

The question you need to ask yourself is, when was the last time you raised your prices? Our guess, well, nine out of 10 small businesses undercharge. Why?

Scary not to. If you start to realize wealthy customers want to be sold, your entire business can change. The question though is what do rich people actually buy?

There are five reasons rich people buy. Only five. Every single reason falls into this hierarchy that I call the rich desire pyramid and teach to all of our portfolio companies.

Number one, status. Status means make me look important. It's the top of the pyramid.

How do you sell it? You position your business as the best, not the cheapest. When they ask, well, can I get a discount?

You say, well, you could. Uh, but you might regret buying from that guy. Why don't you just pay a pro now as opposed to regret an amateur later?

You showcase expertise, exclusivity, and premium service. What are companies that do this really well? Because I always like to imitate, then I iterate, then I innovate.

So, you might want to imitate some of the marketing of Hermes limited run purses that are mostly handmade. Although, I hear there's some there's some uh confusion about that by China right now. But, let's stick with the plot, which is one person makes each item from start to finish.

It's special and it's a signal. When you carry a Birkin bag, you are saying something. No one who buys a Birkin bag is trying to ask for discounts.

This is a customer that actually wants to pay more for the alligator extra ridiculous thing on top. Except is it ridiculous if they want to pay for it? In fact, I think you have to flip your brain about that.

Number two in the pyramid is convenience. That means make my life easier. So if you think about rich people, if they have an infinite amount of money, they can buy almost anything, right?

except more time. So if you can do something that allows them to buy back their time, they will pay you for it potentially up to a complete no cap at the top, which I really like. So how do you sell something like this?

Well, you eliminate friction. That would be things like white glove service, subscriptions, concierge treatment, private jets, fast and expensive. For instance, if you go to all major airlines, but we'll use Delta as an example.

Delta has really two classes of tickets, right? They have main cabin and they have first class. So, you might think that the really special people go to first class.

Well, actually, the really special people go to first class and then they get Delta Delta concierge, which is somewhere between $500 and $1,000 for somebody to get them from the front of the airport, drive them around to the back, let them load up first and privately, and it's for no different experience. No, no different product is sold there as far as the seat. It is literally just that it increases convenience for them.

So that is what you need to think about in your business. If right now you have a landscaping service, why wouldn't you add a white glove offering to the top? What might white glove mean?

Might mean, hey, one of our portfolio co companies, we said, what about for new homeowners in really expensive suburban neighborhoods? What if you as their landscaping service said, hey, Mr and Mr. homeowner, I know you're new here.

uh we're happy to give you a landscaping quote and and to do your landscaping for you. Also, we have a group of five other of the top tier uh service providers in your area. So, if you need somebody for cleaning, I can make a recommendation.

If you need somebody for window washing, roofing, interior design, we have a rolodex and I can literally do a white glove introduction for you to all of those people. And what do you do on that? You actually take an affiliate cut on everybody.

So, this is not as scalable. But remember, because you have big margins and because you create convenience, you can have a very sexy business doing white glove service of existing services. By the way, if you're building a business right now and you're stuck or you want to break out to the next level, maybe you're not where you want to be today.

Believe me, I've been there many, many times. I want you to know I got you. We help thousands of business owners a year figure out how to scale to the next level.

One of my favorite mentors said, "Every level you have, there's just a higher level and a higher devil. " And so, if you've been in business for a while and you're doing six, seven, or eight figures, there's probably one thing standing in the way of your next level. That's why we host growth and scale workshops four times a year throughout the year in Austin, in Miami, in San Diego, and you may be a fit to come to one of them.

If it sounds interesting to you to get help on how to scale your business to the next level, you can reach out to my team at the link in the show notes. We believe in you builders, but we also believe that it's a lonely road and you can't do it by yourself. Number three, exclusivity.

Let me in, keep others out. That's what they're saying. This is why there are private members clubs.

This is why there are golf courses. Because rich people want to feel special, good, bad, or otherwise, like them or don't like them. This is something that people want when they have a lot of money to buy.

So, how do you sell it? Restrict access, invite only services, VIP tiers. This creates demand.

Think about it like, I don't know, have you guys ever heard of Tiger 21? Tiger 21 is a fascinating community. You have to have $20 million in net worth to be in a community that you pay $30,000 for a year and they validate your income.

They will not let you in unless they can validate your income and also your net worth. How fascinating is that? And then you're in a room a couple times a year with only other people that are worth $20 million or above.

They don't want any other people in it. So, they charge you a premium for only allowing access to other people just like them. We can hate this and think it's elitist or we can use it and get rich.

It's really up to you. Number four, privacy. Give me some space.

So often once you have a lot of money, other things come with that. Uh for instance, you know, now that I'm public on the internet, there's lots of people that get doxed, right? So they want to make sure that they're protected.

There are entire services for scrubbing all of your information off of the internet. There are services that scrub your businesses off the internet. Don't tell people about them.

You know, supposedly there's quite a few celebrities who scrub their children's photos everywhere off the internet. And so as you get more famous and as you get more money, people want things from you. If you're famous, maybe they want your picture, they want access to you, whatever.

If you have more money, they want some of it. And so if you can create this privacy buffer space, then you can make a lot of money. So how do you sell it?

Well, you offer high trust, high security, high privacy services. A way to do this across the board might be like, I have a cleaning company and I only clean uh really high-end customers houses. So, all of my cleaning ladies sign NDA policies.

They make sure that they understand owner preferences. Um, you can tell us how you want to be communicated with by our cleaners. So, you can do this because you allow absolute discretion which builds loyalty.

This is really, really critical in my mind for service businesses and so underutilized. And, and maybe if you don't have a lot of money right now, this one doesn't make sense to you, but I'm going to tell you how to make any of these make sense to you so you can apply it to your business and your life right after this. Five, scarcity.

Make it hard to get. So, let's think about this for a second. Why do rich people want something to be hard for other people to get?

Well, they want to feel special, right? So, at a certain point, if you have all the money in the world, it's not just about other people thinking highly of you. It's about you being able to tell a story about a thing you were able to do or get or see that somebody else couldn't get.

It's almost like a rich person pioneer, right? They're like, I want to be the first one to plant my flag on a foreign land. So, how do you sell this?

You limit availability. You do this on purpose. And let me tell you how rare this is for entrepreneurs to do.

What do entrepreneurs want to do? Sell more things to more people again and again and again because they want to make more money. It actually like doesn't make sense in your head common sensically to think, well, maybe I should sell less things at a higher price.

But that is what this is. And how you do this is waiting lists, premium tiers, applications all drive demand. Think about waiting for the brand new shoe drops or we talked about Birkin bags before.

In fact, you want to actually have things that are a real commodity, which means they're limited in quantity. I met a guy, I was at this uh event, and this was an event for a bunch of rich people. And uh and you know, funny thing about rich people is they have weird hobbies.

Uh and so this guy in particular, I just exited his second or third SAS company. And I'm sitting down with him and I'm like, "What are you working on right now? " Lord, do I wish I hadn't asked that question because I got a saliloquy on crystal marketplaces.

He had just started a crystal marketplace. Now, now this isn't your ordinary woo woo Austin crystal. He was showing me his crystal collection which was like I don't know million-dollar crystals and I felt like that meme where that like guy is whispering into the girl's ear and she's just dying on the inside as she's listening to him.

That was me with crystals this day. And so he went on and on about how he's bought this million-dollar crystal and it couldn't be anywhere else. And this is so special.

And I feel like he might have missed the plot about what women care about today because he appeared to be single. But why would he care about that? Because there's only one crystal just like that in the world.

There's only one diamond just like that in the world. They're buying into a feeling, a position, a lifestyle. They aren't price sensitive.

They're value sensitive. And once you understand this philosophy, you'll be able to sell to rich people. If you want to sell to wealthy customers, you got to ask yourself the rule of two.

Does your offer hit at least two of these categories. If you're selling convenience, add exclusivity. If you're selling status, add scarcity.

If you're selling privacy, add convenience. Rich people want to spend money. Give them a reason to.

Here's the difference between the two. Selling cheap means you're going to have price sensitive high churn. You're going to have harder to scale volume game.

You're going to have competitors everywhere. Selling rich means they will pay a premium for the right product, no price shopping if they trust you, and will keep spending if you deliver. The difference between the two is really one singular idea.

Do you understand rich people? And if if right now you're like, "Oh, this sounds great, Cody, but I've never even met a person who could buy a Birking bag or wouldn't think a 3050 or a $200,000 purse is criminal. " Then I need you to do something.

You see what changes in when we are around other people who have money, it opens up our eyes to what is possible. And so what I'd like you to do is I would like you to go to somewhere that rich people are. If you're in LA, go to Beverly Hills.

I just want you to walk around. You don't have to buy anything. You don't have to do anything.

Go to a luxury shopping mall. See how they engage with their customers there. Try to engage with the people who are there and see how they treat you versus other customers.

What can you do to change the way that they treat you? If you dress a certain way, will they treat you differently? Go and sit in the lobby of the most expensive hotel you can find.

Ritz Carlton, Four Seasons. Drss how you think is appropriate. You can bring your own food and drink if you want to be be uh sneaky about that.

But I want you to watch the people coming in and out of the lobby. How do they engage? If you get a chance, sit and chat with them.

One of my friends, Jesse Eler, when he had no money before he married Sarah Blakeley and they became billionaires and he started NetJets and a bunch of big companies, he used to go to the Beverly Hills Hotel in uh in California. And he had no money then, but he would spend the little money that he had buying the cheapest item on the lunch menu in order to sit at lunch in Hollywood and meet as many people as he could. And every single day he would have a goal of engaging with one or two people there.

And then he would see how do these people engage in life? How do they think about things? How do they build?

How do they get opportunities? And he credits those conversations with some of his path to becoming a billionaire. So get around rich people.

Sell to rich people. You will make more money. See you next week.

I believe you are capable of building big, beautiful companies. Hey, I have something special for you for being such a loyal listener because you're here with me all the time. I get asked by a bunch of you, how do I tell if I should buy a business or not?

Should you buy a business or not? What price should you buy a business at? How do you structure your deal?

I got you, fam. So, I'm gonna gift you our deal calculator. Every time I look at a deal, I grab the numbers, plug it in here, and see how much money I could make or lose if I did a good or bad deal.

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No matter what, here's your free gift. And if you need a hand to hold, I got you, too. Hey, crew.

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