How to Charge 3x Without Losing Clients. Hormozi Hotline | Ep 975
In this episode of The Game, Alex Hormozi examines the transition from being a hands-on service provider to becoming a business owner. He presents service providers with a key decision: they can either focus on perfecting their craft as technicians, or they can develop the skills needed to scale their operations as business owners. Using examples from his experience, Hormozi explains how this transition requires developing new capabilities and understanding different business models.
The episode covers strategies for attracting high-value clients and setting premium prices without losing business. Hormozi discusses how to differentiate services in competitive markets, target clients who have both means and motivation, and create pricing structures based on the value delivered rather than market rates. He also explores methods for enhancing service offerings to justify higher prices while maintaining a strong client base.
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1-Page Summary
From Technician to Businessperson in a Service Business
Hormozi explores the journey of transitioning from a hands-on service provider to a successful business owner, highlighting key decisions and strategies along the way.
The Fundamental Choice
At the core of business growth, Hormozi presents service providers with a crucial decision: either perfect their craft as an artist/technician or scale their operation as a businessperson. Using the example of a leather wallet maker, he explains that artists can respond to increased demand by raising prices, while businesspeople might scale through hiring or automation. This transition, he notes, requires developing entirely new skill sets.
Building Value and Sustainability
Drawing from his personal experience, Hormozi emphasizes that mastering business skills takes time and investment, similar to mastering a craft. He advises focusing on sustainable business models that generate recurring revenue or command premium prices. For example, he suggests specialized services like neuropathy treatments that can justify higher pricing, or packaging services with additional value components like supplements.
Strategies For High-Value Client Acquisition
Hormozi emphasizes targeting successful clients who have both the means and motivation to invest in premium services. Rather than pursuing struggling prospects, he advises focusing on those already performing well who want to improve further. This approach, he explains, allows businesses to charge higher prices while providing exceptional value through unique, compelling experiences.
Pricing and Positioning Strategy
In discussing pricing strategy, Hormozi advises against competing on price in commoditized markets. Instead, he recommends differentiating offerings and pricing based on value delivered rather than market rates. For instance, if a service helps clients earn an additional $2,000, the pricing should reflect this value creation. He also suggests enhancing service offerings with additional features, such as adding complementary services or improving the overall customer experience, to justify premium pricing.
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Counterarguments
- While specializing and targeting high-value clients can be effective, it may also limit the market size and exclude potential customers who could benefit from the service but cannot afford premium prices.
- Raising prices in response to increased demand may not always be feasible, especially in competitive markets where customers are price-sensitive.
- Developing new business skills is important, but not all technicians may have the aptitude or desire to become businesspeople, and some may prefer to partner with or hire someone with those skills.
- Sustainable business models are crucial, but the definition of sustainability can vary, and some businesses may find success with models that do not necessarily focus on recurring revenue or premium pricing.
- Targeting successful clients can be a sound strategy, but it may also create a dependency on a narrow client base that could be risky if market conditions change.
- Competing on price can sometimes be a valid strategy, especially for new entrants trying to gain market share or for businesses operating in highly price-sensitive markets.
- Pricing based on value delivered is ideal, but determining and communicating the value can be challenging, and customers may not always agree with the business's assessment of value.
- Enhancing service offerings can justify premium pricing, but there is a risk of overcomplicating the service or adding features that customers do not value, which could lead to inefficiencies and increased costs without corresponding revenue increases.
Actionables
- You can assess your current skills and interests to decide if you want to focus on craftsmanship or business growth. Start by listing your strengths and passions, then compare them to the skills needed for technical mastery versus those for business management. For example, if you're a freelance graphic designer who loves creating but dislikes networking, you might choose to refine your design skills and raise your prices rather than expanding your business.
- Develop a simple feedback system to gauge the unique value you provide to clients. Create a short, anonymous survey for clients to fill out after you deliver your service, asking them to rate the value they received and any benefits they've noticed. This can help you understand what aspects of your service justify a premium price. For instance, if you're a personal trainer, you might discover clients value your personalized nutrition advice, which could lead to offering tailored meal plans as a premium service.
- Experiment with bundling your services with complementary offerings to enhance value. Identify a common need or desire among your clients that aligns with your service and find a way to address it with an add-on. For example, if you're a web developer, you could partner with a content creator to offer a package deal that includes both website development and initial content creation, providing a more comprehensive solution for clients looking to establish an online presence.
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From Technician to Businessperson in a Service Business
Discussing the transformation from a hands-on technician to an effective businessperson in a service-oriented business, Hormozi outlines the different paths and strategies one can take toward professional growth and business success.
Choose Between Artist/Technician or Businessperson
Providers Can Perfect Their Craft or Scale Their Business, Requiring Different Skills and Mindsets
Hormozi presents the caller with a fundamental choice: pursue perfection in their craft as an artist/technician or aim to grow the business as a businessperson. Using the example of a leather wallet maker, Hormozi explains that as an artist, one could continue to perfect the craft and respond to increased demand with higher prices. On the flip side, as a businessperson, one could scale the operation by hiring others or automating parts of the process. This business path requires learning new skills, such as manufacturing and supply chain management.
The caller's transition from artist to businessperson brings to light the challenges in adapting to the business skills needed.
Building a Successful Business Takes Time and Investment
Investing In Education and Skills, Despite Short-Term Setbacks, Is Essential for Long-Term Growth
Hormozi compares mastering craftsmanship, like carpentry, to learning business, underscoring that both require time and dedication. He uses his own experience of transitioning from financial success back to zero five years into his business venture, emphasizing that the true gain in business growth lies in skill acquisition, not just immediate financial rewards.
Prioritize a Sustainable Business Model Over Immediate Revenue
E ...
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From Technician to Businessperson in a Service Business
Additional Materials
Counterarguments
- While specialization and premium pricing can be effective, they may also limit the market base, as not all customers are willing or able to pay premium prices. Diversification in services and pricing can help reach a broader audience.
- The dichotomy between artist/technician and businessperson might be oversimplified; many successful entrepreneurs blend both roles effectively, maintaining their craft while also managing their business adeptly.
- Scaling a business through hiring or automation requires significant capital and management skills, which may not be feasible or desirable for all individuals, especially those who prefer hands-on work or have limited resources.
- The emphasis on recurring revenue models and premium pricing may not be applicable to all types of service businesses, especially those in highly competitive markets where customers are price-sensitive.
- Mergers and acquisitions can indeed provide growth opportunities, but they also come with risks such as cultural clashes, integration challenges, and increased debt, which can threaten the stability of the business.
- The ...
Actionables
- You can assess your core competencies by writing down your top five skills and determining if they align more with artistic/technical expertise or business management. This self-assessment will help you understand where your strengths lie and what path of development you should pursue. For example, if your skills are predominantly creative, focus on mastering your craft; if they're strategic and organizational, consider business management courses.
- Develop a personal learning plan that includes both online courses and local workshops in areas where you need growth, such as supply chain management for aspiring businesspeople or advanced artistic techniques for technicians. This plan should have clear milestones and timelines, like completing a specific course within three months or attending a workshop every quarter, ensuring consistent progress.
- Create a "future services roadmap" to visualize how you can evolve your ...
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Strategies For Attracting and Converting High-Value Clients
Driving business growth involves attracting clients with the financial capacity and desire to invest in high-quality services that deliver exceptional results. Here are strategies to attract and convert high-value clients, as advised by Alex Hormozi and drawn from practical examples.
Target Premium Clients
To establish a successful business, particularly in a service industry like coaching, you should aim to attract clients who are already successful or positioned for success.
Seek Successful Clients to Enhance Their Businesses, Not Struggling Ones Lacking Budget
The caller talks about targeting underperforming fishing guides, which implies they are aiming for clients who currently aren't doing well but have potential. Alex Hormozi points out the flaw in this approach, advising the caller not to focus on underperforming individuals. Instead, he suggests targeting clients who are doing well and are looking to further improve their performance. These clients are more likely to have the budget and the willingness to pay for services that could help them excel, making them ideal candidates for premium offerings.
Provide Exceptional Value to Justify Higher Prices
To justify higher prices, a business must offer services that deliver significantly more value than standard offerings on the market. This aligns with creating what Hormozi describes as a "grand slam offer."
Offer Premium Services For a Unique, Compelling Client Experience
For instance, Caller #2 discusses a business model that begins with a free step-by-step guide, serving as a lead magnet, with an upsell to one-on-one coaching. This model creates an entry point of value that captivates interest and gradually introduces the potential for a transformative, premium service. Hormozi echoes this by suggesting that providing more value is not just about pricing, but about enhancing the client's existing conditions - either by attracting clients with substantial resources or by equipping current clients to increase their resources through the service provided.
Leverage Exi ...
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Strategies For Attracting and Converting High-Value Clients
Additional Materials
Counterarguments
- While targeting clients who are already successful can be a sound strategy, it may also limit the potential market and ignore emerging businesses or individuals who could become high-value clients with the right support.
- Focusing exclusively on clients who can afford premium services might lead to overlooking opportunities for innovation and market expansion in serving a broader audience with different pricing models.
- The strategy of providing significantly more value than standard offerings to justify higher prices could be unsustainable for some businesses, especially if the costs of delivering such value exceed the financial return.
- Using a free guide as a lead magnet followed by an upsell might not always be effective, as some clients could perceive this as a bait-and-switch tactic, which could harm trust and credibility.
- Relying heavily on testimonials and case studies assumes that prospects will trust these sources. However, some clients may be skeptical of such marketing materials, preferring unbiased reviews or personal recommendations.
- The advice to not focus on underperforming individuals may be too general; some underperforming clients could have untapped potential and may benefi ...
Actionables
- You can refine your client profile by identifying traits of your ideal customer, such as their success level, industry, and willingness to invest in themselves. Start by creating a detailed avatar of your ideal client, including their business size, revenue, personal and professional goals, and the challenges they're willing to pay to overcome. This will help you tailor your marketing messages and service offerings to attract the right clientele.
- Develop a unique service package that goes beyond the basics by incorporating your personal expertise or a novel approach to solving client problems. For instance, if you're a graphic designer, you could offer a comprehensive branding package that includes not just logo design but also social media strategy and a brand storytelling workshop. This creates a differentiated offering that can command a higher pr ...
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Pricing and Positioning a Business to Maximize Profitability
Alex Hormozi offers advice on how businesses can avoid competing solely on price, particularly in commoditized markets, and instead focus on creating unique value propositions and pricing based on value.
Avoid Competing On Price In a Commoditized Market
Differentiate Offerings for Unique Value Proposition to Avoid Race to the Bottom
Hormozi identifies that the caller is selling a commodity, and advises to avoid competing on price. He clarifies that while commodities compete on price, businesses should aim to offer a grand sum that competes on value. Hormozi stresses the need to decommoditize offerings and become distinct from the competition, a strategy that is applicable across various industries.
Charge For Value, Not Market Rates
Price Based On Value, Not Competitors
Hormozi advises businesses to price their services based on the value they provide, rather than adhering to standard market rates. For instance, Caller #2 describes a coaching service that can potentially add an extra $2,000 to clients' earnings. Hormozi suggests pricing the service to reflect the significant increase in client profits, rather than using the average rates for coaching services as a benchmark.
He proposes charging significantly more for services like a fishing charter business by focusing on the value delivered to customers. If the services help clients make more money, he suggests the business can justify charging higher prices. Hormozi reiterates the importance of ignoring competitor pricing and instead pricing services based on the business's unique value.
Continuously Improve and Expand Your Service Offerings
Enhance Client Experience ...
Here’s what you’ll find in our full summary
Pricing and Positioning a Business to Maximize Profitability
Additional Materials
Counterarguments
- Differentiation can be costly and may not always lead to higher profitability if the market does not value the unique aspects of the offering.
- Some markets are highly price-sensitive, and customers may not be willing to pay a premium for added value, limiting the effectiveness of value-based pricing.
- Competing on value rather than price can exclude a segment of the market that is price-sensitive, potentially reducing market share.
- The assumption that customers will recognize and be willing to pay for additional value is not always correct; customer perception of value is subjective and can be challenging to influence.
- Enhancing customer experience and continuously improving services require additional investment, which may not always result in a proportional increase in revenue.
- Focusing on wealthier customers with premium experiences may alienate a business's existing customer base o ...
Actionables
- You can create a personal brand that emphasizes your unique skills and hobbies to stand out in the job market. Start by identifying what you're passionate about or skilled in that others might not be, such as a unique combination of interests like urban gardening and digital marketing. Then, build your resume, LinkedIn profile, and personal website around this niche, showcasing projects or experiences that highlight this intersection, making you a go-to person in a field that's not oversaturated.
- Develop a habit of sending personalized follow-ups to professionals you interact with, offering insights or resources tailored to their business challenges. After networking events or meetings, instead of just sending a standard 'nice to meet you' email, research a recent challenge the person or their company faced and include a thoughtful suggestion or an article that addresses that issue. This approach demonstrates your value beyond just your job title and can lead to opportunities that are not solely based on competing with others on common credentials.
- Volunteer to lead a community project that solves a l ...
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