Throwback: Billionaire Recession Advice: Sell to the Rich | Ep 852

0:00Hey guys, welcome back to the game. Today is a throwback episode where I go over a handful of things, specifically around pricing and the downtrim effects it has on the business in terms of the business. that you bring in and what kind of team you can attract as a result, which can spin the long-term wheel for a sustainable competitive advantage. And I think that there's a little bit of nuance that I dive into in more detail here around the different viewpoints between rich and poor people and how that can have huge cascading effects in the business. Enjoy. When people are poor, they tend to sell out of their own wallet.

0:36They sell using their perception of what money is. And so they think something's expensive and therefore they don't want to be offensive to whoever they're selling to. But what that is, is fundamentally a selfish viewpoint because you're never putting yourself in the other person's shoes. And the other person might have all the money in the world and just want to solve a specific problem. And so what I want to walk through today is why charging more has five significant benefits to your customers that actually make you a better service provider by charging more money. And it'll give you five specific benefits around your actual business itself that'll make your business more successful.

1:10And if you don't know who I am, my name is Alex Mosey, own acquisition.com. We run a portfolio companies that does over$200 million a year. And I make these because I want you to make lots and lots of money and then hopefully someday partner with us. Beyond that, it's just to make you more money. All right. So have you ever seen this meme? That's like, the customer says, well, what exactly am I going to be getting for$50? And then it has the rich customers like wire set, let me know what next steps are, right? It's this wildly different viewpoint that poor people have versus rich people. And at the same time, I made three tweets in a row that each one of them massively outperformed.

1:43And it was so weird to me that this was like a novel concept. And I said, solve rich people problems, they pay better. And if you solve rich people problems, they will make you one of them. And when you solve rich people problems, you get to charge rich people prices. And so it's this interesting concept that a lot of people miss out on. And part of the reason that a$50 person is saying, well, what exactly am I be getting? If somebody has got$100 in their bank account, you're asking for 50 % of their net worth, right? And so for them, it's a very important decision, but it's also completely ridiculous.

2:16And unfortunately, this still might be half the population. Doesn't mean necessarily you should sell to them, right? And to the same degree, that$50 ,000 might have been less than 1 % of that other person's net worth. So they just didn't even care. It would have been the equivalent of trying to sell a dollar to that person who's$100 in their bank account, right? And the thing is, is that you can only go to zero, right? Like you can only be so poor, right? But you can be infinitely rich. And so your upside is uncapped, but your downside is zero. And so when you deal with rich people, you have unlimited upside, which is why they are better customers.

2:49Now, like I said, there's five things I want to talk about from the customer's perspective. And my whole goal of this is to actually sell you on one, increasing your prices. but two, increasing the quality of your customers. Because if you increase the quality of your customers, you increase the quality of your business. And in a very real way, the smarter the people you sell to, the actually better the client results are. All right, so let's dive into the five. So number one, when you charge more money for your products or services, you get an increased emotional investment, right? Because on the flip side, if you decrease your price, people care less about your products and services.

3:24So if you ever have anything that you have, you require something on behalf of the other person, which almost all products and services do. Even physical products and services, people have to open up a box, they have to set it up, et cetera. And so if you have a very low cost item, people won't even give it the time of day. They won't even try enough that even if your product or service is good, they never even gave it a shot. And so when you raise the price, you raise their emotional investment. And in a real way, you actually increase the likelihood that they get results. So the second way is that it increases their perceived value.

3:54So I tell this story a lot, but I'll tell it to you right now. So there was a research study where they had three bottles of wine. All right. They had a cheap wine, they had a mid price wine, and they had an expensive one and they had people try them out and they had them rank them based on what they thought. And so people said, Oh, I think the most expensive wine is the best. The middle price is the middle and the cheapest wine was the worst. And that's not that surprising, except when the researchers explained that all three wines were the same. And so in a very real way, when you raise your prices, you do actually make something that's more valuable because if that's what we're trying to get at, which is value, price confers value to your product.

4:33A more expensive thing is perceived in real terms as more valuable, even if the actual core product is the same. Why would you not want to make your thing more valuable? The third is results for your customers. If you increase their emotional investment, you increase their perceived value, what ends up happening? They actually do get better results. They do have a better wine experience. They do when they sign up for the gym for personal training versus a$10 a month thing, they get better results. And so if you want to get people the results that you promise, or you claim that you're going to get them, then you should stack every single chip in your favor.

5:09That's going to get them the result that you're promising. And the price is one of those things. And so some people want to lower their price because like, I want to help everybody, but you're actually not. You're not helping everybody because most of those people aren't going to be emotionally invested. They're not going to proceed as valuable. They're not going to get the results that you so promised, which means that you have to draw a line in the sand and say, I can only help the people who are swimming towards me. So the fourth thing is that when you raise your prices, you actually attract less demanding customers.

5:36And so anybody who's ever been in client services can attest to this, but the higher the price tag, the more expensive the contract, the more upfront someone pays their bills, the fewer payment plans you have to set up, the easier the customer is to deal with. And if you've ever had this, like the paid in full upfront, hey, can I save a little bit if I pay in all cash today? That customer, that one is the easiest one to deal with. The one that you have to arm wrestle for an hour to get$50 on a payment plan over 24 months, this investment is so important that they're going to milk the life out of you to get every penny's worth out of you.

6:12And it's like, sometimes it's not worth it because just like prices what you pay values what you get, on the flip side, just because someone pays you money, you may be underwater in what you have to deliver. So just because someone's willing to pay you doesn't mean that you should take it. The fifth benefit that your customers will get as a result of raising your prices is that you actually have more money that you can deliver on your promises for. So imagine you've got a hard cost thing that costs$5, right? And you can add and subtract zeros here. I'm just using simple numbers. So if you have$5 to do the thing, right, and you charge$8, we only have$3 left to run the rest of your business, provide service, etc.

6:54Right? Like you don't have a lot of room there. Now, imagine you charge$50 for that same$5 thing. You have$45 of additional gross profit that, or additional would be$42, of additional gross profit that you can now use to blow the other competitor's experience out of the water. Like, you can, in a very real way, deliver two, three, four times the value. And in many times, if you do deliver two, three, four times the value, the customer gets a better experience. And so if our whole business here is actually trying to provide value, then we want to increase the emotional investment of the customer.

7:29We want to increase the perceived value. We want to have the least demanding person possible, have the most possible revenue we can have to deliver the results that the person actually wants. And so if we make these promises, we should stack as many of the chips as we can in our favor. And one of the biggest ones is the price. Now, let's talk about the business side because there's five significant things that will change when you start raising your prices in the business. Number one is that, like the example I gave, if you had an$8 thing that cost you$5, you have$3 in gross profit and you've got to run everything else off of those$3.

8:07So if you were just the most efficient person in the world, right, let's maybe just run on half of that, which is$1.50 left, right? We're already paper thin here, right? On the flip side, when you have a significantly higher price, you have way more room to make mistakes. And I say that because no one's perfect. We all make mistakes in business. And what you don't want is mistakes that you can't recover from. And having a premium priced product or a luxury product that has a lot of margin there allows you to make mistakes. And as businesses are seasonal and you have macroeconomic environments, the people who don't have that padding are the ones that go under.

8:43And so having that padding in a real way can increase the likelihood that you can play the game in the long run. The second thing is that as a business, it actually increases your perceived value of self. Like, what do you think about when you think about, you know, a Walmart versus a Saks Fifth Avenue or a Neiman Marcus, right? They occupy different spaces in your mind. And if you're the business owner of that business, then having a higher perceived value of self, which a lot of times when people are starting out, they don't think they're worth very much. And sometimes they're right. But the thing is, is that you still need to charge a certain amount so that you can have the excess resources to get better.

9:17If you never have any money left over, you can never reinvest in yourself. You can't reinvest in your employees. I'm getting a little bit ahead of myself in terms of things that you can do, but well, screw it. This leads naturally to the next one, which is when you have extra cash left over, you can reinvest in your product, right? You can actually research and you can test out new things. You can make prototypes. You can test out new divisions of service. You can attract higher level talent to your business. If you have no margin, the best people aren't going to work for you. Why? Because they're going to go to the real business owner who understands how margin needs to work so they can attract the best talent.

9:52And then now you're not only being out competed by that person in terms of profits, but they also can scale way better than you because they have decentralized decision making because they have lots of smart people all working together because they priced the product right. And they're dealing with the right types of customers. Whereas you're sitting here dealing with fires all day because of people haggling over$50 with employees who can't string sentences together because you can't pay anybody who's worth a shit to actually work for you. It's a terrible life. I know because I lived it. So just don't make that mistake.

10:25Like start off high and allow the extra profits to increase your perceived value of self, help you attract the better customers, have the profits to reinvest in the business itself, attract better quality employees, increase the conviction of your sales team if you do sell ever. Because think about it. If they're selling the shit product and they see the other guy on the market who's more expensive, the only thing they're going to have is, well, we're a lot cheaper. They know you're not better. But if you're the salesperson, you can approach and say, well, yeah, I mean, if you want, you can try that one first and then come back to us because that's what everyone else does.

11:02Right. Or you can not make the mistake and actually save yourself a little bit of money. And instead of buying twice, just buy nice once and solve the problem for good. And so the salespeople can enter these phone calls or these conversations with the conviction that they're actually going to help this person. And that is the best way to sell is having the full conviction that your product is the best. And you can't say your product's the best if you're trying to do it on margin and you don't have the money to reinvest in good people, reinvest in keeping it innovative at the front of the market.

11:31You can't do it, right? And so I'm a big believer in just making big promises and then delivering on big promises. Like that is the types of businesses that I like to build. And when you have all of these higher paying, lower demanding, happier customers, your perception of the real impact you're actually making goes up. And so your conviction over the entire business and your mission of like, I actually came here to help people, starts to become reinforced. And it becomes this snowball that starts rolling. And you have these testimonials and these reviews that start rolling in. And the momentum builds.

12:07On the flip side, if you don't have that, you have less margin. It becomes this vicious cycle in the other direction where you're not getting these testimonials. You're getting these chargebacks and refunds from these demanding customers that had unrealistic expectations because it was such a high percentage of their net worth. There was nothing that was going to save them from themselves. You have two stories that you can play out. Solving rich people problems allow you to charge rich people prices. They pay better. They're easier to work with. and ultimately they allow you to build a business that can withstand different seasons and be in a position to succeed long run.

12:41This is very fortuitous timing-wise, but the time of this being made, the richest man in the world, everyone's like, what about big tech? What about AI? And believe me, I think it's scary shit. So the richest man in the world right now is not big tech, it's not big pharma, all the things that the news wants to talk about. It's a man selling$10 ,000 purses, all right? If you don't know who he is, his name is Bernard Arnault. he owns most of the major luxury brands that you've heard of so if you've ever been to a luxury mall and if you haven't i really strongly recommend that you go to one because it might not be in your neighborhood it might not even be close to your city but you should go because what will happen is it will stretch your mind in terms of what you believe is possible if you don't make a lot of money and you see a purse for ten thousand dollars you see a jacket for fifty thousand dollars it changes something about how you see reality you're like and i and i would urge you to not say, those people are ridiculous.

13:30I can't believe someone would spend money on that. What I want you to do is actually empathize with the buyer. What kind of person would spend$50 ,000 on a jacket? Well, what conditions would have to be true in order for that to make sense? Because think about this. A lot of people are like, rich people are crazy, but rich people are the ones with all the money. So they must have done something differently than poor people. So try and think about why would it make sense to this person? Well, if I can pick from all jackets and I have so much money that the difference between a hundred dollar jacket and a$50 ,000 jacket in relative terms is a$10 difference to me and my wealth, then I just want the best jacket.

14:09And so I'm willing to just pay whatever it is, because if you had a significantly better jacket for$10 more than your own net worth, you probably would be willing to pay for it. And so do they, it's just that they have more zeros. And so Bernard Arnault capitalized on this. And so there's four distinct positions you can have in any marketplace. You can have bargain, which is the absolute cheapest one, which typically is poor quality in general, poor experience, but barely, barely gets the job done. But it gets the job done, but barely. The next is best value. All right. So this is the difference between like a Walmart and a Target, right?

14:43Target is better value. It's got brighter lights, it's cleaner in theory, right? And it's just a little bit better, right? It's the best value for the buck. The third position in the marketplace is premium. So it's the best version. That's the high-end Lexus, right? That's the BMW. These are premium products. They're above average. Based on price, it's not the best value, but is better than the best value. And then the fourth position in the marketplace is luxury, where the price has no cap. And part of the value of the product itself is the cost that people know you paid to get it. So Bernard Arnault lives in this luxury bubble.

15:25It's where people associate their status with the purchase they made. And what an amazing position to be in. He's like, so I just raised my prices even more and people want to buy more. And so there's called Veblen goods and economics. They actually defy the supply demand curve rules because typically when you raise prices, you decrease volume. But in luxury goods, when you raise prices, you increase how many you sell. And that creates this unbelievable amount of profit, which is what has now propelled him to be the single richest man in the world. Something to learn from this guy. And so the number one question that I got from all the tweet responses I had from those three or four tweets in a row I made about solving rich people problems is, well, what are rich people problems?

16:05It's a great question. So rich people have the same problems that poor people do. They just want them solved differently. And if we go back to our trusted value equation, the big thing we want is we want to deliver a big dream outcome, right? We want to deliver an outcome that they want, number one. Number two, we want them to believe with very high confidence that if they work with us, they're going to get what we promised. On the bottom side, they want it to be incredibly fast. So as soon as they pay, they want to get. And then they want to have as little effort and sacrifice as humanly possible.

16:37And with the rich, speed and convenience are paramount because the money is never an issue. It's how much are you going to ask of my time and how painful are you going to make this for me? And so if you think about the white collar echelon, you've got investment bankers, you've got management consultants, all right, at the highest level, in my opinion, of this kind of white collar world who deal with rich clients. the banking world fundamentally goes to rich people and says i'm going to allow you to give me a billion dollars and i'm going to take that billion dollars and i'm going to give you back five billion dollars in 10 years or five years or whatever and they're like okay well what do i have to do and they're like nothing you just write me the check like okay so i write you the check and then there's nothing else i have to do correct well what's my perceived likelihood of achievement How do I know this is going to happen?

17:30Well, here are the other three funds I've done, and I've averaged X over five years in each of these ones. Okay, so you've done this three times over 15 years, and you've had that each time. It's a pretty high perceived likelihood of achievement. The dream outcome is I want to make way more money, and I'm going to do it without any time or effort on my part. Here you go. That is how billions of dollars are made, because they find what problem does a rich person have? What can they do with their money, right? Which is why investment vehicles and investment opportunities appeal to the wealthy. And the more passive you can make it, the less time involvement they have, the more turnkey it is, the higher the likelihood that you have a tracker that they're going to get what you have promised.

18:11They'll write you an unlimited check. If you can get 20 % returns like Clockwork with virtually no risk, you can tap into literally unlimited money. Anyone. Massive amounts. And a key point here was risk. If you find a way that there basically is no risk and you can get 20 % returns twice the stock market, you can have as much money as you want. Now, here's where the little wrinkle comes in for those types of solutions. Many times you can find those things, but the opportunity can't take unlimited money. So a buddy of mine had figured out a short-term revolving credit line thing for specific businesses that can't get credit lines, but they had assets in excess of the credit line.

18:51Meaning if they defaulted for whatever reason, they could claim assets that were worth more. So it's asset backed loans. And so he was able to get 50 % annual returns, but he maxed out that entire market with like $20 million of liquidity, that little niche that he had found in business. But$20 million may be more than what you currently are working with. And he structured his fund so that he would get 20 % of the upside. And so if he takes$20 million and he does 50 % growth every year, right? Right. He's able to grow to whatever it is. I don't know, 100 million bucks at the end of this. And he gets 20 percent.

19:24So he makes 20 million dollars. And so for many of you watching this, you'd be like, I'd be happy with 20 million dollars. And so all you have to do is find ways to solve rich people problems. And that's a big investment bubble. But let's let's go down to like day to day types of businesses. Rich people will want often the same services as poor people because they are humans. But the way they want it delivered is going to be focusing on the bottom two variables of value, effort and sacrifice and time. rich people will always pay for speed. And so if you don't have a fast option, or if you look at a marketplace and there's lots of slow stuff, the easiest way to appeal to the rich is just do the same thing in half the time.

20:02Whatever the service is, if it's dry cleaning and they can do it in a day, return it by end of day, right? And the effort and sacrifice. If you were in any kind of home services type business, a lot of the issues there is English speaking people, right? A lot of people don't speak very good English. They would pay the premium to just know that one, their stuff's not going to get stolen. Two, the stuff's going to be done consistently every time. And three, they're going to be speaking to somebody who understands them immediately. And they don't have to repeat themselves and then say an entire sentence in English and say, comprende?

20:31Or see? Right? They don't want that. And this, mind you, this is in America. So whatever your native tongue of your country is, apply that thinking to whatever the service is. You just want to make sure that whatever the rich person's native tongue is, is you're making it as easy and effortless as possible for them to communicate with you in whatever way they want. And so if you only have a phone number, well, be the person that can accept anything. So that if they email you, if they shoot you a text, if they WhatsApp you, if they phone call, you can accept anything because you've made it more easy and convenient and effortless for them to communicate with you.

21:08And so I want you to think through these value equation variables because that is fundamentally how you deal with rich people. It's that they just want it to be effortless. They don't want to think about it. And they will pay you through the nose to do it because for them, it's not through the nose. Because you need to make sure you're selling out of their wallet, not yours. Hey guys, real quick, if you're new to the podcast, I have a book on Amazon. It's called$100 Million Offers at over 8 ,000 five-star reviews. And it has almost a perfect score. You can get it for 99 cents on Kindle. The reason I bring it up is that I put over a thousand hours into writing that book And it's my biggest give to our community So it's my very shameless way of trying to get you to like me more And ultimately make more dollars so that later on in your business career I can potentially partner with you So that's my give go check it out amazon and back to the show One of the main things I want to hit here is how you sell to rich people Okay The big thing that poor people do when they're trying to sell in general is again They sell out of their own wallet when I say that it's like if you're poor, you think this means a lot.

22:08And so you feel like you have to justify your price all the time. If I hear that, I might automatically know that this person is a probably poor B doesn't deal with many rich people. And so they will weed you out knowing that you don't know how to deal with people like them. Real talk. When you sell to rich people, the benefits for them are always around it being the best, not it being the best value. It's not, I want to get the most bang for my buck. It's I just want the most bang, period. And I want it to be as easy and effortless as humanly possible. So I went to a fur coat store when I was in Park City.

22:45And I actually met one of the best salespeople I've ever met, I got a really good overcome from him that I'll tell you right now, because I think it's awesome. Layla was trying on these fur coats, because I think they're ridiculous. And I love that stuff. And we at the time lived in Austin, Texas. So it's hot all the time. There's literally never a point where you could wear a fur coat in Austin. And she said, you know, it's not about the money. She was like, I just don't think I'm ever going to wear this thing. And he said, well, if they were free, would you take one? And she was like, well, good point.

23:16He's like, well, then it's not not about the money. And he just redirected it back to the price. Now, what's interesting is that not once during the entire conversation that we had there, did he ever mention that the fur coat was going to be waterproof? Not ever did he mention that it was going to be the warmest jacket, right? Because it's not going to beat the Gore-Tex, you know, Arcteric, Spider, you know, whatever, you know, double, triple, platinum, whatever, right? Fake down that can't be destroyed in flames, right? It's never that, right? All he was talking about was how we were going to look and feel with this jacket or how Layla was going to look and feel at events and basically getting her to imagine what the experience would look like after experiencing the product, right?

23:57And so if you're dealing with rich people on a regular basis, you have to think about the things that they're going to do and how they're going to experience the product, not the way you think you would experience it. And so this is where there's the golden rule, which is treat other people the way you want to be treated. But that's not actually the best rule for selling. You want to treat people the way they want to be treated, which is the platinum rule, which if you've ever heard of that stuff. And so it's really coming from a place of empathy. And if right now you don't have a lot of money and you have like a little bit of distaste for rich people, I like from the bottom of my heart, you have to get rid of that because you cannot become something you hate.