 All right, me and Brett are here today to talk about pricing for growth and also directly related to why tech companies go out of business and why they can never move out of their garage or why they can't move from ever being a one man show or a lot of other related things to it because it comes down to pricing your products, pricing your services and we were joking around just before here we try not to do too much free talk we laugh because I told them I said you know how I recognize the tech company is going to go out of business right away especially in the IT service field they start with a headline I'm cutting everyone's prices I'm going to beat everyone by half I'm just going to do services for half of what Tom charges and I'm going to beat you at it and I've been in business for 15 years yeah I've actually had that told to me directly have you ever seen it on a sign or anything we'll beat Tom's prices yes so fun story directly into this we had advertised prices for like the laptop screen repair at my retail store another retail store opens up down the street and really copies my sign exactly same wording and everything not the guy obviously they put their logo on it not mine really yeah and then charge almost half what we charge I don't know how they were doing it now my favorite part was he used to we stocked all the screen repair and he didn't so he used to come down asking us for screens and I would sell them to him for the same price he was charging for the repair and he says how am I supposed to make any money at that I'm like that's really not my problem and he would say his he even tried to explain to me his business method was to get a bunch of customers and directly compete with me like he'd tell me this and by getting the parts from me and he didn't care if he lost money for a while because he was going to make it up in a long term how's that work out for people Brett that doesn't work out very well you there insurance companies are are are notorious for doing that when they they go they call it buying a market and and when you go into buy a market and and you sit there and undercut everybody at some point you're going to have to raise prices and and it's funny is the consumer some consumers are key on this and and they key in on it but a lot don't because in a lot of things a lot of people are trying to get the best price and or they're trying to get the cheapest price and don't don't forget you get what you pay for yeah and when they try to get that cheap price I mean so you get an insurance company they'll come into a market or some other company they'll come into market like you just said and and advertise if they're going to give you the best rates they're going to cut your rates in half it's going to be half the price eventually yeah it's going to be that and you might get a good product but what's going to happen is eventually if you're still continuing to use those people the price is going to go up and most likely it's going to go up over a period of time that you're not going to notice it and eventually you end up paying more than what you would have paid for using somebody else yeah and in the other side especially when you come to the IT service business which I can directly speak to is the customers you get with that and one came in the other day and he was a he kept saying we were too expensive for things which was normal and he told us backups were too expensive too and now his business is in a level of chaos of losing all the data that he lost and it was an accounting firm and the guy is just that so he went back in between using us and using this other guy who charged him one third of what we charged so but of course the guy who charges one third is very busy the guy is definitely busy and he doesn't return phone calls sometimes for a week at a time so when this person wasn't returning phone call he comes back and calls us and he agrees to pay our rates uh he still complains about them he lets us know each time you know your rates are just way too high I only pay one I know but you're calling us because he's not answering the phone is how he's joke around with the guy we've uh we've established that we like to joke around with him and we tease him about being a very cheap individual but we told him this time there's no help he's like what do you mean I'm like the data's gone well like I seen it on tv the data's never really gone oh no no that's uh that's a great tv show but uh the data's gone like it is there is no backups there is no this thing has completely uh it broke the the the drive is like the platter the pieces came off for those of you that want to know the technical details the the platter broke the glass in it because it had the laptop hard drive it's just a mess if there's no getting this data back right and he doesn't he he was dumbfounded by this and uh very upset and but this comes down to sometimes if you're trying to do that you attract some of those I imagine this guy the person who charges this accounting firm very small amounts of money probably doesn't like answering his phone because he comes out there he offers these flat rate services for $30 they'll come out to your office but it's also why he's been in business for uh 10 12 years round I've known the guy for a while that does his it work and he's still a one-man show sometimes a two-man show but I don't uh he's he finds like right uh random people to work for him that I don't know that are under the table probably or something like it yeah see this old retired guy seem nice but kind of strange um and I see some of these people they come and go and it's one of the one of the problems is if you're not thinking about how you're going to grow your business if you start out like well hey when I charge 30 bucks I make 30 bucks go certain a pocket and uh and I can undercut Tom because you know he's got staff and a building and things like that well maybe that's what you want is to always be that way and that's fine if that's what your choice is but you have to think about that the reason I charge all this and reason I do have all these expenses and building and employees and staff and insurance bonded all those things that are important uh to running a business is it was price for growth I always charged a lot because I plan to hire people to do it and this is you can't hire people to do it if you start charging very little you now have just worked yourself into being trapped you're like wow I'm only charging this much so I don't now the good news is in the beginning you do kind of enjoy a good margin yes um technically my margin a little bit goes down when you start paying someone but then you make up for it by freeing yourself up because now you can bill and the other person to bill and eventually you're like me and they have maybe eight people working for you and I'm sitting here making a video and I got everyone out there billing right now man I got a project going I got like a team working on some stuff and then we use contractors as well but I couldn't hire a contractor I'd have to do everything myself if I didn't bill enough right well you you said you say bill enough um but you said something earlier that I wanted to stop you from saying but I of course I was I charged too much yeah you said that you don't charge too much you because you've taken your model and you go okay this is what this cost this is what that cost and you take and you mention out you've got the part you've got the time for service you've got your what you're paying for your insurance your rent your employees that all has to factor into your price yeah and it has to factor into the beginning price if you're starting a tech company and you just want and it's really hard and so if you went in and you go I'm going to go steal Tom's cuspers by offering half rate and then I'm going to increase rate over time well I've had people offer a lot of my good clients will never switch they're just kind of like why would I go with someone half the price it's not they're not always saying about price now price does matter and I'm going to do a separate video on some of my MSP stuff and talk about how the practices I do and things like that and pricing is really hard because it's very market driven and when the market is sparse like let's say Wi-Fi installs we've been doing a lot of them and I've been trying to figure out am I under pricing or not and I think the other company's maybe overpricing and this is where the free market kind of helps decide but when there's very few people it's hard to get indicators and this is a perfect example and maybe the person because I he found me from YouTube is watching this and he realized that the for managed Wi-Fi service every three months because they're leasing him the hardware and providing the service so they say this much per month you have Wi-Fi in your building like this is the fee how much you set that fee at well this company said it's so high that every three months and he's got 200 Wi-Fi access points every three months he completely can buy all the access points and he doesn't own them now so is that too much at the time when this company presented it no but now they've been a few years into it I mean at least no because there wasn't another comparison they had because this company's been doing it for a few years and that's what they think the right price is I don't know should someone be making $200,000 a year profit for a one place on Wi-Fi it seems kind of high to me so we came in with a proposal that does allow me to make money and doesn't cost them where they're buying the entire service every in only three months so well it goes to integrity and greed I mean think about that yeah you're not you have integrity and you know that you have to price to be so business has to make a profit right has to but you know you have the integrity to say that this is what is really going to cost now another business can be greedy now so you you came in an undercut and you talked about someone coming but you undercut it in a in a way that was it still made sense to you to not have greed in in your business I mean it goes to integrity or greed right and so there is a happy balance you have to find so when you're setting your prices you do kind of have to look around maybe maybe shop the competition a little bit the you know and if you want to know like oh what's the trick to becoming a millionaire type thing well sometimes and we were just play the lottery play lottery is one of them and way you can undercut prices there's ways you can it's one of the books I've recommended before is Jay Samet wrote a book called disrupt you wonderful book and when you disrupt a marketplace because you have a new innovative way of doing something and you go hey wow these companies have been doing it the hard way if for example the remote support method we use and now everyone's going well we're all sports common actually one of the things that we've taken away from a lot of these companies is doing everything remotely and managing it we're doing these bids and they're like well we're used to the other guys that charges two hours of drive time every time they come out then they seem to take two hours to do something the only every time we call them there they want to show up on site every single time right and because that's their billing model they're used to doing on site we go wow most of these problems are you know oh problem about look I can fix it remotely problem the printer I can fix it remotely so we try to focus on a remote which now saves both people money so I'm able to save the company money while still myself remaining profitable because we don't have to leave so I don't I don't lose a technician for an hour of driving and traffic my technician now has a good billable rate because he can flat rate a small amount of time so that is a disruptive model where we can make a lot more money in the tech field and it's funny because it's 2018 and I'm still my my friends works for all those companies that they do not do anything they drive they drive to it yes they have I think they have nine or ten tax but they want the owner wants everyone to drive because drive is billable that's his answer drive is billable man why why did you tell him how to click it on the phone drive out there and click it for him because that's a bet's 150 dollar bill for you showing up so eight or nine tax and a billable hours think if he could do if he did his remote leak it probably cut his tax and half and increases profit by a big margin I'm not gonna say huge yeah but a big margin and that's what we are we've gotten and this is just the way the market's got as we've gotten better and better at remote support you know what support tools have gotten better the ability to do things has gotten easier and because of that you know it's made my company more profitable and we try less but it's funny to see here in 2018 there's still companies that really focus on that so there are other ways you can undercut the market and save companies money in it but in the reason I bring up the jay salmon disrupt use because the book is full of not related to tech always but tons of little ideas of how companies saved a fortune by doing some innovative market change you know there's all these little stories like how pencil oil got started by putting no one had the idea before pencil to put oil in a plastic container that was what made that a billion dollar company was everyone used these stupid spillable you remember the one I remember you had to push the hole they had this nozzle yeah and if you don't remember that you're missing something in life you're not as old as us or you never worked on cars but so those little things that can disrupt the market this is those are ways you can you know find different angles that are really lucrative because there's no one else in the market versus some things and we'll bring out my cabling there was a discussion in one of the forums these are public forums you can find on Facebook or on reddit for people discussing tech business and someone's like wow I'm getting undercut all over the place on the cabling installs I'm like yeah we we try we've kept our prices reasonable on that but I see people charging a lot more but it once you get into a very commoditized I need to run the cable from here to here I need a wall plate on it there's not much there's not much margin for that there is a it's a commoditized product so you got to think about it too if you're doing a commoditized product that's very easy to price you're not going to make as much money and it kind of you got to be careful because it can be a little bit of a race to serial margin so you always got to be looking at where you're providing value for your clients right well you do you do a lot more than just that too but sometimes you have to charge for what's in here I mean in my business I charge for what's in here mostly yes and you have to as well because you there's a lot of things you're doing that are only in Tom's head right and and and that that that's a valuable information that you only Tom can extract well in it and that's something that we do sell his consulting services just like he does he does business consulting I do IT consulting and you know the people that understand it and I some people don't and I made someone angry yesterday because they didn't get it they called and just wanted me to walk them through all the network equipment and tell them what to buy for their setup and they thought I should just walk I said no we have a fee for this we'll do a network design fee kind of give me a list of what like your goal I always say start with the goal start with how you want your network planned just give me a general layout I look at it and for a fee I will tell you what components go where we do this kind of consulting all the time for other IT companies for other IT managers this is a service we offer it it works really well we're doing a consulting for an IT firm they're doing a big move they've never moved a company they maintain their internal IT team maintains our IT they've never done a move so they consulted us on how to do the move how to set up all the equipment and what equipment to put in place at the new building to make the transition really smooth so you know that's a consulting fee I have an hourly rate I gave him a price and that's just charging for knowledge I have in how do you set the price on that they're willing to pay quite a bit for it because they want a smooth transition I guarantee it I have a good reputation for doing this type of work and you can set flat prices for that I you know you can give them an hourly fee just because they want to hang out with me your time is super available and if you want to hang out with me my time is super valuable and I charge a lot for me directly right flat rating things works really well how much they tell me scope a project and go I wanted to get I got to move from here to here and here's how many staff members are here's how many network drops are going to be and I go here's a price I'll tell you I'll just do it for this price fixed guarantee it done and away you go and that goes into one more thing I want to talk about pricing yeah is this for you in the tech world I can set up a VPN really really fast the new guy cannot right so you have to think about that in your pricing model don't necessarily charge things per hour you know how many years I've been doing some of these technical things I can do them you know half awake right and still get them right versus as you know when you're new you're like wow there's a lot of things to learn so you don't always want to price per hour you want to try whenever you can the flat rate things and then you decide whether or not you do it or you outsource to someone and you have to figure out how much you're paying your tax but there's it's a lot of moving components in there but it also helps how you create your margin flat rating stuff helps you quite a bit and setting the prices so you can think about where you want to be is important there's the other perspective of what do people think of the guy who wants 30 bucks versus the guy that wants 150 to do the same thing well you get what you pay for yeah and business owners are having you get what you pay for in that respect especially in your world I gotta say because I've seen good companies like you and I've seen some not so good companies which I will not mention that have worked with some of my clients and that I'm trying to get them over to Tom Tom's gonna be working with a client that I've had but it's funny how you got that referral away from me but we're both working with the same client here in an area that we have and he's doing now going to be taking over their IT work and they had somebody that well they did a flat rate but their flat rate was astronomical yeah and their service quality was bad very long drive times because they're about two hours away they have I looked at their website it's crazy I don't know we're not mentioning my mention name but if you want a way not to do things and just be confusing the way they word things everything is uh yeah that's why the company wants to switch they've not they've not gotten good service use you really important in anything is being able to deliver on your thing this is you know he has talked a lot about integrity and it's really important in his business and my business is if you sell a product I would deliver on it and these companies come up with these high prices as if they're doing it and when you think about it the reason a lot of business owners they actually do understand value and the ones that don't maybe aren't the right clients for you I hate always saying that sometimes I've had clients but this is also what's led to firing clients and there's a reason a lot of them are driving a nice Mercedes or something like that they understand the value and the luxury comforts of having a nice vehicle and things like that this same thing kind of goes to you if they look at you as the Mercedes really look at you as oh wow you're the kind of crappy twenty two thousand one Toyota the Pinto yeah you're the Pinto over here um I love my Pinto yeah Pintos are cool as long as you get reared to buy them they were really cool car so it's also that perception you have on yourself we try to keep a level as much as I joke around and you know we're we're both wearing uh you're gonna golf shirt on we're both wearing shorts things like that but when it when it comes down to business my guys show up with uh Lawrence technology shirts on we look presentable uh we make sure things are organized we make sure that all of our work top to bottom you know our our wearing jobs and ones are you have a very uh visible uh after result because they can look at the wiring we even have vacuums is an important thing that are in our trucks so we vacuum up and clean up your mess yeah we clean up our mess like it's there's a whole presentation well of course how can I pay a guy if I'm paying a guy the bottom dollar he's gonna go I'm barely making anything on this job I'm ready to get out of here man I'm I got something better to go do because I'm not making much money because this goes into I pay my staff very well if you in I can't afford to pay him well if I wasn't charging well and it just it goes full circle because I see these people can play and they can't find technicians I'm like you're trying to hire a guy for a minimum wage well it's looking forward I'm trying to be the the guy in town that takes all the business so I got my prices down here at the bottom and I'm gonna try and make it up in quantity so I'm trying to pay minimum wage and I can't figure out why I can't find a super good tech and I'm like yeah you can kind of see how this all compounds into why you need to charge for your services because all the super good techs are coming to work for you yeah yeah I mean let's face it you're you've got a great team yeah and building a great team is not just pay it's also creating environment and things like that uh because obviously there's driving no one maybe someone likes driving I driving around traffic here Detroit's awful it is and my friend who works for the company they pay him very well but he's uh that's why I have a lot of insight I have a lot of it friends and one of them he works for the company they pay him well and uh he's been there a long time but he hates that they just make him get in the car all the time because that way he can generate billable hours he tries him nuts he's like they pay for his car they pay for everything like he's got a company car company phone and uh they do a lot of specialized work but he's just like man I have to drive out for stuff I know I could just click he he's come here hung out with us he's like you guys just like click a button I'm like yeah they won't allow remote support for the owners just like really old school you would be able to bill as much if you did that what century are we in I know I'm just sitting there thinking what's it I mean within years we're gonna have screens that just pop up right in front of us I mean they already have that technology oh I know we're doing this all the time and we've yeah so but I can't tell you what to exactly set your prices for it's gonna be different for everybody it's gonna be different based on your area and that's the camera I'm gonna leave this here we don't pay a ton for this building because we're south of Detroit and the rates are really good Detroit is weird because if you go on the north side of Detroit it's not just double it's about 10 times as much to rent a building we can get we pay for this building you know a few thousand dollars a month and costs for this building if I'm because we're in the southern Wayne County area if we go to Oakland County that same building is about five thousand dollars in costs per month just to have the building and with the same square footage so you you have to counter price according if you live in New York and you're in Manhattan you probably couldn't you know people see the price I've seen the prices text chart share and people see that's ridiculous I'm like well no what they have to cover their costs have to cover your costs you lived in Seattle so yeah you know too Seattle man there's there's neighborhoods there's you know they have over a million dollars the average home price exactly so you have to price accordingly so I can't if I told you prices now this is where the remote thing works out good for us because I thought our remote rate was reasonable and high until someone uh we did some work in California you're like how can you live on that rate and I'm like pretty well actually come down here and see where we're at but of course you know we're doing Wi-Fi for this apartment complex and you know we gave them a lot of flat rates to get some of the project done wrong because it's all just the remote programming and they're doing the physical layer uh but I you know because you were looking at it we're like oh wow that's only a five thousand dollar a month apartment like they pay more for an apartment than we pay for a building yeah yeah that's that's it it's intense but so you said something about you being here and being able to do remote and I want to plug Tom a little bit here is because if you're out in Oakland County or if you're anywhere anywhere Tom can remote yeah and give you a better price yeah okay I'm just going to say that but you're going to get the expertise that Tom has the expertise his team has and not have to pay somebody to go drive your location right and it's and it goes back to you know we talked a little bit about it before but it's like it costs a living allowances and things like that uh California is an example there's an article about the working homeless these people are making $80,000 a year and are homeless and uh they live in her car because California price should be expensive so when you think about in fact for all those price and it makes it very hard to build a tech company that does service with remotely because you're like yeah I have to pay my technicians 150k a year to that so all of your prices get scaled up or so if you happen to be in an area that's very more rural you can do very well and I'll I mentioned before and I've we've done a video together before me and Chris from crosstalk solutions his business model is interesting and he lives in a beautiful more remote area in the other side of the state that's not in a dense city but he also doesn't have a lot of those expenses he's been able to run his consultancy business that way and do well and he's actually also built an entire remote team he doesn't have a building that like I do that his team goes to he does manage them remotely and it's also another perspective but he's still christening to cheapest I'll tell you that right now um his project prices they're reasonable they're of good value he's really wicked smart and does a good job but he's also just because he doesn't have what you visibly see like I am with the building he still has a team he pays he still works and coordinates that so they will have to charge for that um so you got to find that happy balance like I said I can't just throw it out there and see this is your prices but I will tell you that if you just if you if you're a concept of starting a business is I'm just going to undercut everybody that's my first sign that we're probably not going to be in business long right so unless you've come up with an innovative new way to do business a neat idea in the remote things not new but it is clearly new to this other company right right they're not doing that yeah they're not doing that when we've been able to snag customers you know so unless you're doing something really market changing and different and you know if you're going to start a business uh think about that you know think about all those factors before you get in before you jump into it so I'll leave you with that and uh thank you oh and I'll leave the in the links below where you can find out more about Brett and you guys know about me so yeah all right thank you thanks for watching if you like this video go ahead and click the thumbs up leave us some feedback below to let us know any details what you like and didn't like as well because we love hearing the feedback or if you just want to say thanks leave a comment if you wanted to be notified of new videos as they come out go ahead and subscribe and the bell icon that lets YouTube know that you're interested in notifications hopefully they send them as we've learned with YouTube anyways if you want to contract us for consulting 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