Many years ago, I owned my own company where I installed, maintained, and repaired commercial grade fitness equipment. From years of experience, I became an expert. At that time, it wasn’t unheard of for people to have large multi-station strength machines in their homes. These machines would have anywhere from one to five weight stacks weighing about 200 pounds each. It was a monstrosity of steel, cables, and pulleys.
One of my services was moving these things. People would buy a new house and would hire me to disassemble the monstrosity, move it, and re-install it in their new house. Some people would attempt this on their own or hire common movers.
Problem was, when they tried to reassemble it, they got very lost. Every cable is a different length and there were different sized pulleys and lots of them. If you didn’t know what you were doing, the task was virtually impossible. So, I would get a phone call and my job then was to go out and undo everything they did and assemble it correctly.
After some quick Q&A over the phone, I’d give them a price, they’d agree, and I went and performed the service. One time, I walked into a spaghetti pile of cables; pulley’s, nuts, and bolts were everywhere. It took me about two minutes to stand there and observe the situation and once I got it, I got to work. That job, as bad as it looked, took me about 20 minutes to complete and when I was done, the machine was fully functional.
I called the guy into the room, showed him that everything worked, and he was good to go. I then mentioned the fee we agreed to over the phone and he said, “But, it only took you 20 minutes!”
Here we go. So I said, “Would it have been worth more to you if it took me three hours? You’re paying for expertise and know-how, not time.”
He wrote the check almost in annoyance and we parted ways with no cordiality. These machines weren’t cheap and to have one in your home meant you were doing pretty well financially. And this guy owned his own business, so I wondered how he would react if the shoe was on the other foot. And then … I let it go. Moved on.
Years later, I read this story about Pablo Picasso and you probably know it by now. It goes like this:
Picasso was at a Paris market when an admirer approached and asked if he could do a quick sketch on a paper napkin for her.
Picasso politely agreed, promptly created a drawing, and handed back the napkin — but not before asking for a million Francs (about $2,100).
The lady was shocked: “How can you ask for so much? It took you five minutes to draw this!”
“No”, Picasso replied, “It took me 40 years to draw this in five minutes.”
Recently, I saw an interview with Chris Cho and Ron Baker and Ron made some fantastic points:
‘Self-esteem, or self-respect is the reputation we have with ourselves. That’s our first sale. If you don’t believe you’re worth ten times your hourly rate or time, your customers won’t believe it either.”
If we’re teaching yoga, painting a house, or teaching someone how to play an instrument, we must believe our expertise and delivery of it is worth our fee.
But that comes with a responsibility. So, Ron also said … “We wouldn’t want a heart surgeon that dabbles in it.” Know your craft better than anyone. Be the expert; be amazing at what you do and take it a step further.
Here’s some more great wisdom from this interview:
“Have conversations with your customer to learn what they value. A value conversation. Because, prescription without diagnosis is malpractice.”
“Don’t tie labor and time to value. Do not charge or bill by billable hours. The threshold is a wall.” It’s about skill, talent, expertise, professionalism, impact, rarity, etc. and the end result of all these things coming together to deliver a highly valuable outcome.
“It’s about value and perceived value by the consumer. Focus obsessively on value and the customer experience.”
“You need to be able to articulate your value and pricing.” This also takes belief.
“If you want better clients, charge more.”
“Price on the outcome, not the process.” People pay for a great product or service, not the drama of the process it took to deliver it to us.
“How much, how hard, or how long you worked on something doesn’t matter. No one cares. Stop whining about it. It’s about the customer perception of value. Because you hired employees, bought equipment, signed a lease, bought insurance, bought a license, paid for marketing, etc doesn’t mean the world owes you a living. They don’t owe you your costs plus profit. It’s an entitlement mindset. You’re not entitled to anything.”
“The cost of coffee went up? I don’t care about Starbuck’s internal costs. We’re not Starbuck’s cost accountant. Just shut up and raise the price, but quit trying to justify the increase with a boring explanation. Customers aren’t buying your costs. They’re buying a great cup of coffee and the experience.”
“Cost does not determine price. Price justifies cost.
People regularly pay upwards of $90 for a one-hour massage, but have a problem with $25 for that same hour of yoga. As Ron also said, “Consumers value a coat ten time more than a hat. That’s why it costs more.” It’s not about materials, time, and labor. In fact, between the hat and the coat, the difference is minimal. It’s about value and the customer’s perception of value is subjective. “And customers change their minds on a dime.”