Pricing as a Service-Based Business

How I got here…

21: Graduated Vanderbilt in 3 years Magna Cum Laude, and took a fancy consulting job.
23 yrs old: Left my fancy consulting job to start a business (a gym).
24 yrs old: Opened 5 gym locations.
26 yrs old: Closed down 6th gym. Lost everything.
26 yrs old: Got back to launching gyms (launched 33). Then, lost everything for a 2nd time.
26 yrs old: In desperation, started licensing model as a hail mary. It worked.
27 yrs old: "Gym Launch" does $3M profit the next 6 months. Then $17M profit next 12 months.
28 yrs old: Started Prestige Labs. $20M the first year.
29 yrs old: Launched ALAN, a software company for agencies to work leads for customers. Scaled to $1.7mmo within 6 months.
31 yrs old: Sold 75% of UseAlan to a strategic buyer in an all stock deal.
31 yrs old: Sold 66% of Gym Launch & Prestige Labs at $46.2M valuation in all-cash deal to American Pacific Group. (you can google it)
32 yrs old: Started making free content showing how we grow companies to make real business education accessible to everyone (and) to attract business owners to invest or scale their businesses.

Today: Our portfolio now does $200M/yr between 10 companies. The largest doing $100M/yr the smallest doing $5M per year. Our ownership varies between 20% and 100% ownership of the companies. Many of them we invested in early and helped grow (which is how we make our money - not youtube videos).

To all the gladiators in the arena, we’re all in the middle of writing our own stories. The worse the monsters, the more epic the story.

You either get an epic outcome or an epic story. Both mean you win.

Keep crushing. May your desires be greater than your obstacles.

Never quit,

Alex

*FULL DISCLOSURE*
I make content to make money - just - on a longer time horizon than most. I want to build trust with business owners so we can find the best ones and help them scale. And if they’re awesome, write them a check and go all the way as partners.

[withwilk]

You actually want to charge more to fewer customers. 10 clients paying 25$ an hour is better than 20 clients paying 12.50$. Gardening for example, drive to a wealthy area, charge high to clients with big gardens that require multiple hours. Continue to offer other services to them like roof clearing, tree cutting. And use word of mouth to build a client base in that rich area. Also add ons like trailer hire and waste removal you can charge a day rate for

[arunsingh]

This would be a very valuable piece if you can make a longer version of it !👌🏼🙏🏼🙏🏼

[goncalonunes]

How do you determine those 10-20% when there isn't a clear financial gain for the client?

[AlexMcDaniels]

Another key here is being different, it’s much more easy to charge more if what you sell is not the same as anyone else. 👌

[-rio-]

Value based pricing based on what value proposition you provide, such a great tip 👌

[karelmikan]

I wonder how to do that in the educational sector for kindergarten teachers. How do you value them being more relaxed, understanding children better, raising social-emotional stable adults...? Value for society in billions (being able and not afraid to try new things fast and recover from failure, being able to lead...), value for teachers...their well being.... value for kids ... healthier and more successful.... price... 20% of what?

[adilsheikh]

This is awesome advice if we're selling something that is tangible. What if we're providing a service which is not intangible. Such as helping someone overcome some kind of negativity etc. Maybe someone who has heart disease is now much healthier and not needing to take as many medicines. How would you apply this for someone like that?

[adrianwalker]

I based my price by looking at the average and then putting my prices at the top percentile and make sure my service was also in the top percentile. Slowly raised prices until it didn't make sense. The market will determine your value

[uziidoesit]

Agreed Alex!! 🔥 I think a lot of service based businesses make the MISTAKE of basing their prices based on the "competition" and not the value they're delivering on.

[-]

How can I apply this to a lawn mowing business? I always priced based off of time it takes me.

[yossi]

I am a photographer for small businesses. How can I estimate the 'value' of the service?

[tommymaher]

Just my take but this is how i approach it as a web dev.

Lets say i do an ecom site and the goal i have is to help the customer increase sales.

If the clients business does 10k a week for example and i can help them increase user conversion by 50% of what they have before i start ( this is an example ) i will charge according to this.

Also i check company accounts and any public info to gauge how well they are doing before any of this.

Price based on impact and deliverables not on the market.

[Runeing]

Makes sense for a service that increases a businesses finances. What about power cleaning, window washing, car detailing, etc..

[therefinedbusinessblueprint]

So true, I see so many of my clients make the mistake of the first strategy you talked about. It's harder to raise your prices than it is to lower them!

[ConsciousCrypto]

Well, then the question is how to quantify the value delivered? SO one can take a 10-20% cut

[D.sense]

How would you measure, value for creative services which are not countable.

[Wellnes_GPS]

How do you determine the value of a health outcome? The disappearance or improvement of a health condition - diabetes, anxiety, blood pressure, low thyroid, etc.?

[JensHilzensauer]

@alexhormosi how would you price as a private therapy/coaching practice as there is no price associated with being free of depression f.e.
And how would you reduce churn? The absurd thing is I am really good but that means most clients are done after 6 sessions, so the better I do my job the less money I make. Just price accordingly?
Like I can do what most therapists accomplish in 6 sessions instead of 12, so I can ask for more money?
And how can I increase my impact and help more people? Therapy training or group coaching? Probably both?

[Ver-wnel]

Maybe not relatable, but we had to give up contracting (in farming) because we would get undercut by young guys bringing their fathers machinery and working for barely any money, like super cheap. Whereas we have employee wages, fuel, parts/upkeep, and machenery as expenses, they have none of that and can drive a ridiculously low price, to the point where it barely paid them to do it, like it would've been well below minimum wage.

[worldclassrealtors]

Thanks Alex I needed this 👍 Take care and God bless 🙏