How to Price a Service Business So It Actually Makes Money | Ep 1002

0:00I'm going to help a complete stranger build a$5 million per year business in 90 days, step by step. And at the end of the 90 days, we're going to check in and show you exactly what happened. This is Joey. Enjoy. Joey, what's up? All right, tell me about the business. Yes. So my name is Joey Goone. My business is Utopia Experience. We are an event planning company out of St. Louis, Missouri. Is it fail or fail? I am with 400 of my closest friends.

0:28So last year, the average deal size for event planning was$34 ,000. This year, trailing 12 months is$44 ,000. Audio-visual average spend is between$20 ,000 and$150 ,000 per event. Video production is more of a pass-through to just make it easy for clients. Got it. Okay. What's holding you back right now? I'm just not really sure what the strategy is that we should pursue when it comes to the acquisition channel. So why do you think this can scale? That's a great question. I'm just like in awe. I love you so much. it's mutual man um why do i think this can scale so before i came here i actually flew here from my sister's wedding in mexico i asked 100 people on that trip with us it's like the entire wedding party what's one thing in your life that you can never have enough of and i thought i'd get some silly answers because people are drunk doing whatever in the pool and i thought i was going to get sex or money and i got some of that but mostly what people told me was some version of connection, community, tribe, family, belonging.

1:25And that's the industry that we're in. So our industry, what we're selling is fundamentally what people need. It is a human need. It's wired into our primal DNA. And so that's why I think it could scale. And the market cap on events right now is 1.5 trillion. It's projected to hit 3.5 trillion by 2033. So those numbers back up our industry. I'm so convicted on my quest that I'm going to persevere. I've been resilient since I was a nine-year-old kid. I know this business is going to grow. With your help, I'm ready to scale it. Sweet. Walk me through how your pricing process works because it's very make-believe, right?

2:04Yeah. A little abstract. Yeah. And since you have a margin issue, I think it's a margin issue, how do these numbers get pulled out of thin air? Because right now it sounds like they just say, we want X, Y, and Z, and then you create some line items and then make up numbers on those line items and then come up with a number at the bottom and then send it to them. Like I come to you and I say, I'm doing an acquisition.com event, right? We're going to do a thousand person event here in Vegas and we want full AV and some on-site support. What goes, like when you hear that, what actually goes through your head?

2:35What's included in every package is a$15 ,000 overall retainer to retain our services. So that's the first thing. Like a one-time upfront fee that gets added on to the other make-believe prices. Exactly. Got it. Yes. and then after that it's you know sponsor management um that's about 15k then there's vendor management vendor management is um like managing all the contractors yeah so it's the um the photo booth the video production team all of those elements that that you know sort of come into the event yeah it's the venue procurement strategy so if you guys if you're taking your team to some other place outside of vegas you need a hotel which hotel are you going to work with how are you going to get people to and from the airport and so you'll bill for the logistics of managing that as well if it's part of the scope of work or whatever.

3:19Right. That's 7 ,500. Is there anything about headcount? That's the thing. So we learned a lesson, we put the guardrails up. And so now we're actually deploying like tiered structures where if you have over a certain number of attendees or over a certain amount of vendors or sponsors, then there's a tier that where you pay more based on the number of people that you have. Got it. Okay. I think I know what to do. So you want to hop on the side? Sure.

3:44so um there's a dimension issue for sure but i think that part of it is because you're mispriced and so the pricing has to do with the offer and so we kind of have to start with the offer and then fix price and then go sales motion and then go demand increase does that make sense got it okay we got to fix the thing we're selling once we fix the thing we're selling we'll fix how we're selling it. And then if we're selling it well, we can price it the way we want to price it. Okay. I can't believe I'm sitting next to you right now. It's mutual. Okay. So the first thing that has to happen is you have to cost out what true costs are for different levels of delivery.

4:27And then whenever you have that price, I want you to five or 10 X that cost. And then that's what your price is. And so you'll probably have to create like a dynamic sheet, which you could either code with AI really easily or just have like an if-then type Excel sheet. Either way would work. But as you're going through it with a customer, it should basically pop out what that price for that thing's going to be. And it's all dynamic. So we have headcount of the event. And then from there, we're going to have our variable costs, which are what are the costs that scale with headcount? So we have sponsors, vendors.

5:02Yeah, exactly. So these are the costs that scale with this. and are going to be proportional. Sure. And then we're going to have our fixed costs, which is going to be Amber can only, it's one quarter of Amber. So it's like, great, that's going to be 15K is one quarter of Amber because she can only handle four. And then what other fixed costs do we have that are probably going to be more fixed payroll stuff versus kind of the other costs that are associated that are going to be more like the AV related or whatever. Got it. Is that track? Yeah, for sure. Okay. So once you have this, it's like you're going to have a sheet that has a cost number that comes to the bottom.

5:33You're not going to show that to them. And then at that point, you know that your range is going to be 5 to 10x, this number. And that to me would be like, how rich is the person I'm talking to? I'm just being real. Bigger company, if you get lawn care in one of the top 10 zip codes in the United States, and you have the exact same amount of grass, and you have it in a really poor part of the United States, the price difference between that lawn care, as somebody who knows, it's 2 to 3x difference, and I just call it a zip code tax. right this is the privilege i get to have is to pay more for the exact same thing i love that right can i just say to all the future clients out there that you're gonna pay you're gonna make it's gonna be a great price it's gonna be you know you're fine um at the end of the day everyone else is doing this too they're just not being organized about it um so that's number one is that we need to have standardized pricing so that you can actually get your sales guys to be able to quote without having this super long delay in the process and so the end of the year you're not like how much money do we make we should know exactly which money we're making on every event sure this yeah this this seems like a programmable ai thing that can be done in a couple hours yes now to make this kind of offer better so this gives us our cost basis um what i want to do is add um basically a price lock guarantee which is like as long as you don't change anything about this this is going to be the price and uh we give a you know 10 discount um if you pre-put all ahead that way you can pull cash forward because right now i'm sure you're getting paid some now some in the middle some at the end or something like that does that sound true yeah and something that um that i'm going through is i've never been through a lawsuit um suing a client right now who didn't pay us and now we're having to hunt down that money and uh do they have money nope they just there's no point in suing oh yeah voluntary bankruptcy there's no point in suing yeah just save your save your dollars call it cost a business yeah that's fair yeah just let me let me Let me save you some time.

7:28Let me save you some money and some headache. It's not your accounting of the money, so there's no point. Navigating that. So getting it all up front helps us avoid having to chase it later. 100%. Yeah. There's also the value of money today. If you have a year from now, you just stuck that money into a bond or whatever, you know what I mean? Or the stock market. Well, the stock market is probably not the best way to put it. But something that's a fixed income asset, you'd be able to make the money back. But you also get the value of speed of money today. And most businesses have higher returns on capital than the stock market does, especially small businesses.

7:55And so you're going to get better returns on that. So it makes sense to at least give 10 or 20 % to pull it up. Now we've already built this padding in, so we're fine. Now I want to also create a separate opportunity, which is on the events that are B2B. Now that's not gonna be a lot of them, but the ones where the audience is the customer, I want to have a separate approach to it. So this is our standard way of billing. If someone is B2B, they're basically throwing an event for you. Okay. Not actually, but like they have, you have to take, not that you wouldn't take extra care with a normal event, but if there's ever been a time to blow people's socks off and have an amazingly run event, this would be the time to do it.

8:37Because everybody in the audience is a potential customer. It's the franchisor associations where you've got 1 ,500 of them in the audience that are all doing conferences. Love it. So with these people, it's like number one is, or rather A, I would say we want to get the booth for ourselves in there because they're going to have a booth. Number two is you want to have the opportunity to do some sort of speaking at the event. And it can be like a 15 minute slot. It doesn't have to be a big thing. It's just like, Hey, if you guys have been loving this event, we're, we're utopia, we put this whole thing on and we do this all the time for people like you.

9:09And so you put a little bit of razzle dazzle of like, this is what makes shitty events. This makes great events and say, Hey, if you want these slides, you can give them to your event, your event planner, just QR code on the screen. And I'll send them to you. So you can just actually come into this as like, I probably think it was like 20 mistakes that people who are buying event planning make. And so I would just go through all of the mistakes that people make. And with each of them, proof of one person underneath of them saying that you're awesome at that thing and say, Hey, if you want the slides, go grab them.

9:37But the main sex appeal is that after they kind of opt in to grab them, the opt-in says, do you run events? Like, do you host events and how many per year? And then that way that just becomes a lead list for you. So you're not pitching. It's just like, Hey, the, the, the CTA is, do you want the slides? Which makes it much easier for you to do for the customer. Now, when you have those B2B conferences, I would do whatever it took to get those ones because it's basically them fronting all the cost of getting 500 or 1000 of your ICP in the stadium. And it's like, if you can't close 10 % of that room, then there's other issues, right?

10:11Even if you closed 1 % of the room, you get 15, it'd be a 50 % increase in your business. If you're just from one event, right? And you do more than that per year. So that's why I see this as super material. Like you should be very willing to like, we have this nice high anchor so that we can say, oh, well, you know, I just quoted you 90, but you have five sponsors, right? Do you have any issues with having a sixth? I'll pay you for the booth. I'll pay your sponsor fees, 5 ,000 a booth. I'll pay you 5 ,000. It's at 95 now. How's that? Oh, great. Right. So it's like, we can just start chipping away at it.

10:40And if you'll let me just do an intermission, I'm talking 10 minutes. I'll just talk about how events work. I'm sure we can see, we can frame it as value additive. I'll knock another five off, right? Love it. I'm going to get my sales team on the phone tomorrow to start calling these different associations. And so the last one is just one list email. So basically just say, hey, I don't want to like get your email list. That's that's your own thing. But if after the event, I can say, hey, if you had a great time at the event, if I can just say like basically solicit them and then I'll happily pay you a fee on anybody who decides to book through us and that can further bring this number down.

11:09And I would say typically we're going to get, you know, one percent of people. Sure. This is kind of the the offer pieces. and then this can hopefully fix pricing and also the instant quote issue that you have. Okay. Now, the second part is sales motion. So you're converting 10 times more than your sales team, which is a problem, right? Because you're doing like, if you work leads part-time, you are getting more than two guys full-time, right? Yeah. Okay. So it just means you're doing things they're not doing. So we just have to figure out what those things are. So have you audited any of their DM conversations that they're having?

11:50I've had one meeting with my sales team. I have a follow-up, one meeting just on this specifically. I have a follow-up meeting with them next week to just audit all of their communication and just figure out like, great, like, don't say that, say this. Yeah. So what I want you to do is basically as soon as you kick off, because the issue that you have is you're obviously demand constrained. So instead of weekly, like you should be meeting with them every single day to drive and then do end of day. Because right now this, like you need to drive this. Yeah. Like first thing in the morning, what's your plan?

12:16How many touch points are you going to do? Great. Like walk me through the leads that you're working. What kind of prep have you done for those calls and those reach outs so we can personalize them? And then end of day, how the conversations go, where are we at with pipeline? Like we just need to drive this. From a role playing perspective, the way that like don't do this, do that, you have to then give them the opportunity to try in front of you. Now, part of this is going to be the actual sales. But right now, are they just mostly setting for you to close or are they setting for themselves to close?

12:43Yeah, they're kind of they're end to end. Yeah. Do I need to restructure that? I'd rather have them just set appointments for you because you don't, your sales volume is like two a week, right? It's not, it's not a huge one a week. If you had two guys just setting appointments for you, the likelihood that you'll close them is significantly higher. And you're also the business owner and you can kind of flex on some of these things a little bit better. I would rather you do that because you're closing 40 % of sales, right? That you talk to. Yeah. I mean, if you have four appointments a week, like that's not going to really change anything, but all of a sudden you double your business.

13:11If you have eight appointments a week, you quadruple your business. And that's still not a lot of, like, that's not a lot of work. So just have them be like SDRs, BDRs, booking my calendar completely full. And you can still give them a commission on the thing that they bring in. But you're like, listen, you'll make more money if I'm selling than you are. So like, do this for now. And then I think that'll allow you to stay closer to it so that you can document the process better and your feedback loops will be faster. Because you're like, hey, I got nothing on my calendar today. What the hell's going on?

13:36In a nice way. Sure. Right? Does that feel okay? Yeah. Okay. Okay, weekly, I would go deep with one of them, or not one of them, with each of them one-on-one. The way that we structure these is basically you go personal. You say, hey, how you doing? Hey, if your mom just died, then let's talk about that. Make sure you're good because you're not thinking about your KPIs or quotas if you just got dumped or whatever. The next is, assuming they don't have any personal calamities, we say, okay, we focus on short-term stuff. You're messing this up in the intro. You're messing this up in this part of the scripting.

14:04If they're crushing their KPIs, say, hey, long-term, what are your goals here? Why don't you shadow some of my sales calls? so that you can maybe pick up some of this other stuff. It's basically giving them growth opportunities. But that's the progression that we do with weekly one-on-ones. And in here, it's all role-playing. Like forever, just like you train sales to role-playing. Yeah. Because you have to get them to try so that you can correct them and have more feedback loops. Just think how many feedback loops do I have for these people. It's the only way they learn. Just like saying it at them will do literally nothing.

14:33What's my, you know, my brother and I have been consuming your content for five years, him longer than me. Yeah. I had a call with my brother last week, And he's like, the whore mozy in me is telling you that you're not doing this. So I started booking daily check-ins with my team. Oh, good. Good. Now, I want to give you something that I think is super, super high leverage, which is an idea that I had while you were talking, which is when you open up the call, after you say, hey, how's it going, whatever, and you set the agenda for the call, what's the first question you ask them? Why did you book this call today?

15:05Why not six months from now? Why not six months ago? Okay. So you're clarifying whether they're there. You're on the C part. So what I want to do, there's one question I want to ask in the earlier part of the process, which is how many events per year you do? Because I want automatically, as soon as they can say, well, we do three events a year. Now I just took our average ticket from 80K and made it 240K because now I'm trying to bid for all three. And then what we can do is say, hey, why don't we do all, like, I'll commit to all three for you. We'll do the first one. And assuming the first one goes great, we'll book the other two at the same rate.

15:36That way we can start like trying to increase average ticket and then get into these kind of like very recurring relationships. Do you like that question? Because I think that will have a very big effect. I just want to make sure that that gets added into the script. Okay. One more thing we got to add. So in your existing sales process, the way you were doing it, you'd reach out to them, you'd qualify the lead, and then you'd set an appointment, correct? Yes. Okay. Before they, and on that appointment, you then basically collect all this information and then you'd say, let me get back to you. And then you'd set a follow-up appointment and then you would try and close them on the next call.

16:04Go through the proposal with them live because then you can actually kind of work through those questions and handle the objections. Yes. So I want you to add a video sales letter before the call. Okay. I just recorded it. So before you ever talk to a customer, you should have a video sales letter. Now, if you have two conversations, there's two VSLs. You said this happened before the call? Okay. Yeah. And when someone hops on the call, if they have it like the first question, now inside of the VSL, I can walk through out of structure, but if you already did it, then we can leave it. I like having a little nugget in there, which is having one CTA that's like, hey, by the way, text me your headcount.

16:40Text me the date of the event that you want to do. Text me the week or text me the season, whatever. We just want to have something. So we have some indication they actually watched it and then also engages them with us. So that's good. Increased the likelihood of the show. But beyond that, when you start the call, you'll find out quickly, like, did you watch the video? If the answer is yes, great. If the answer is no, then we say, hey, no worries. this will save us like 30 minutes on the call seven minutes play this now i'm gonna grab a cup of coffee you want a cup of coffee haha it's zoom okay uh and i'll be right back and so then they watch it and then that way they're fresh and primed and the whole conversation's already been framed and you've been edified and all that kind of jazz yeah because this is also what helps you scale sales once it once you stop being the person selling um because we want to do as much of the lifting as we can for the sales people including you because what this will do is it also short the amount of calls you have to have so if you're currently doing two if we do a vsl and then we can do an instant quote, we might be able to change to a one call close.

17:34Got it. And even a worst case scenario, even if you like having the two call, which I'm not against two calls at certain price points. Sometimes it just, people just want to like, it gives the approximation of knowing someone. We can still have our instant quote. And then rather than saying, let's meet in five days, you can say, I'll have this to you by, what time tomorrow works best for you? I'll work on this until then. Because there's also a speed element of like, if it takes you a week to get me a quote, I'm like, man, how long is it like, is this what it's going to be like working with these people if it's like this is priority for me we'll get this done you know i'll get this term by in a day and um house first thing tomorrow morning it's like that speed i can almost guarantee you will increase close rates cool got it okay ah this is another little uh a little nuggy so after the events that you hold what happens so the event's done yep now what within um usually within two days of landing back inst louis we send a follow-up email to the hosts we get them on an event debrief call that's where we're going through what worked what do we want to see improved and when's the event date the event date for next year let's get it booked okay love that just add a vsl beforehand really yeah okay for every conversation you have with the customer frame it okay and so for here it's different different vsl it'll be same the structure will be the same you want different examples and the the objections are going to be the ones that happen after someone has an event and is thinking about booking the next one, not before they book their first event.

18:56So the objections will be different. Okay. So they'll be like, is it gonna be the same price? We'll say, well, it depends on it. Like, so you're just gonna go through what the FAQs normally would be and then just answer them ahead of time before the call. And that way you can spend the whole call actually closing rather than just like transferring information and like yapping at them. Got it. But that'll frame the call. So that basically it's like, so, you know, you just went through your first event with us. Hopefully it was amazing. Don't worry, we're going through the thing. Like everything, like we, perfection is our standard.

19:22And so nothing's ever perfect and we always want to get better. And that's how we've continued to grow as a company. That being said, there's some questions that people have, which is like, uh, building logistics. Uh, what happens with other future events? Uh, when am I going to get my, my video stuff? Like all the questions that people normally have. And then included in that would be, okay, how does, how does working with like, basically, what do we go from here? What's the next step? And I'd say, so we're going to do on the call is also just book, figure out what the next event is so that we can get even more advanced prep because basically the more prep we have, the better the event is.

19:51and so right and so i would just say like so i can tell you that even if there was somebody who is better than us at this which there aren't any of course um if you book with us now we will be better than somebody who's better than us and so you get better value by booking now it's a great frame yeah damaging admission so now we can talk about the like what is the order of operations does that work yeah okay so number one we need to we need to create the call it like the auto auto quote generator, which shouldn't take you that long to build, but you just have to think through what are the costs, what are the variables, what are the, uh, what are the fixed costs?

20:26And then how does it depend by headcount? Great. Now we have our, we have our, at least our cost basis. And then that gives us our range for our pricing, right? Uh, second, uh, you'll add in kind of the, uh, referral slash promotion incentives to this so that you can put your discounts in so that you You can basically solicit more business from them. That's the list and the speaking and the survey close of like, hey, get my slides. And you can sort from there to get new leads. Yep. Okay. Got it. Third element is we need to do daily sales training. Implement VSLs times three because you have three kind of touch points.

21:05You have call one, call two, and then post call, right? We have to increase our outreach, which is going to be first. They're going to start every day by maxing out the platform limits, which means they should be doing exactly what you were doing when you were doing outreach. They should just clone exactly what you're doing. And if they're not doing that, then like either they're the wrong people or you're not good at training. Then we want to do an AI scrape of the contacts to get numbers. And then we want to feed that into a dialer. And there's a ton of different dialer softwares out there that you can use.

21:37What would you do with the dialer? You're having it call the... we want to call the, we just want to, you want to hit it from as many channels as you can. And you're going to have more, like you will be limited by this more than you will be limited by this. And so the call these like the highest likelihood responses because it's warmer, et cetera. But these are where you're going to be able to get a lot of volume. Got it. And for max platform, you're talking about something like LinkedIn, like as many DMS as you can possibly send on the platform. Exactly. Got it. So is Facebook a solid channel that you think we should pursue?

22:05I think LinkedIn would, I would stick with LinkedIn. You've already done that there. You already have a proven process. They're not following it, but you have a proven process. So it's like, how do we just do more of that for now? Got it. Cause any of all these different acquisition channels and my whole focus here was like, how do we get really narrow on the one that like, you have the best LTVD CAC on LinkedIn. So let's do that. And let's do way more. And you already hired two guys. So it's like, we just need to get them on ramps and you need to do that with lots of training and making sure that they are motivated.

22:29Sure. That's basically it. And if you say, this is what we're doing twice a day, every day, I promise you the productivity of the team is going to go up. And since it's the constraint, it's a good use of your time. The piece here is this pricing generator. We should be at five to 10 X our costs for the, right. Now, obviously that's, you're going to be your estimate. You're like, we have to have five is the minimum because it might go over, right? Like you don't know, but the price lock says that we will charge this as long as you don't change anything. If you change something, then we might have to readjust it and then we'll true up at the end.

23:01okay now the higher you go in here the more you can say as long as you're not changing the head count by more than 20 between now and then or we have to change venues or anything like that um this will be the cost no matter what so you can use that as a like if i were selling this i would say something like so there's two ways that this pricing works so one way is you get nickel-nimed the other is that we just pick a price it's within your budget and then as long as you don't do anything crazy that's what the price is going to be which would you rather do right they're like just tell me the just tell me the price it's going to be it's like great boom boom and then we factor in all of the the fudge factor and so it's like to be clear you're not going to change your venue and you're not going to change your headcount by more than 20 we agreed on that okay and like you're not going to all of a sudden say like i want av like these are the services that you're going to get i'll i'll give you fudge factor on headcount up to 20 and then you can't change the uh and you can't change the date right so you can't change the date can't change the venue and then that way it you don't it confines the scope if they break that which they might, then you have a different conversation.

23:58And I don't think I would try and jab people. I just feel like, listen, it's going to cost me 30 % more to do this. But if they're already making the decision that they need to do that, then they've decided that it's worth it. So then if it's worth it, then it's worth paying. Yeah. Does that make sense? It does. Okay. Would you also add in a, you know, like, um, a multi-year kind of agreement? I mean, my goal of asking how many events are you doing is so that I can seed off the fact that, okay, most people who are in your position are doing three events a year. And there are all three events going to be like this.