How to Negotiate When Clients Can't Afford Your Prices (Whiteboard)

I really really don't want to spend more than $1,000 I understand $1,000 is a lot for you I'd like to propose something else I'll do the video for you for free if we get the results that you want I'd like a percentage of the results that sounds fantastic what's the percentage that you're thinking there lots of things I can control so all I want to do is get paid per new customer walks in your door no risk to you I take all the risk couple key Concepts I want to explain in regards to any negotiation whatever you're selling a product or service when you have a buyer and the buyer express interest but doesn't want to pay so they're like huh I have questions about how much money this costs as in this video what are we going to do well most people would just say well I'm insulted take it personally or just say it's a dead thing and I say well maybe it's not a dead thing and that was the context for that negotiation most say Chris we're used to seeing you say no to everybody when the deal isn't right and granted this was the kind of client I don't want to work with I just want to preface that with everybody this is the kind of client who is very foolish with how they spend their money and their time they're not risk taker they're risk averse and they're actually not really good business people Contex he that you can't say no you must accept a deal it's a deal that I don't like so in this case this person was asking a vendor to create a video for them and when the price tag for $1,000 to produce the video they kind of box that said I can't afford that I want this it's important to me but I don't want to pay that so they want to take no risk now we we need to set up the stage here that a lot of people in the comments are saying things like well you shouldn't be paid anything until it works and that poses the question what kind of businesses exists where you can just consume the goods and then decide if you want to pay later on if you're satisfied and I was asking you D go what did you think about that what would your answer be can you think of any business where you can eat the food Use the products drive the car and later on decide if you want to pay or not I mean I don't know of any I think you know I think a lot of people might think of a restaurant but even if you don't like the food you still end up having to pay you still got to pay there's really not a lot of services that you can you know take or get something without paying for it yeah so it feels like you're not getting you're not paying for it because they serve you first but the social contract is such that by the time you're done eating you will pay even if you don't like the meal case in point we went to breakfast the other day and met up with a friend and I was serving something I was way over price for what it was I'm like this cannot be what I ordered because I wouldn't have paid this and I would have bought this but begrudgingly I still pay and tip was included so guess what even if you don't like it you're paying the only places where I can think of this is when it is a donation only like you go to museum sometimes donation only or some kind of shoe shining business could be donation only and yeah okay if you like it you pay a little bit more if you don't like it you don't pay anything at all and wouldn't the world be wonderful if that was the case but you let me know in the comments if you know of a business that you frequent a lot where they're still in business and they're thriving where everyone just gets to pay whatever they want there's not that many so that doesn't fit within the the logic fit test that we have special rules that don't seem to apply to any other use case so I want to dispel that first of all okay so now I was told by Mo who is playing the role of the client it's not stage it's not scripted but it is something that he wanted to test me to see how would would respond with a customer that's just a gnarly customer to work with and he did his very best to be the most obstinate customer but somewhere I think deep inside is really Mo even though he's pretending to be a customer okay so I can say no so I got to work something out so here I am as the vendor I'm like okay if you don't want to pay this then I have to look for an alternative payment method so this person is saying I want to take zero% risk I want no risk at all because I don't want to pay anything I only want to pay if it works fantastic so this opens the door for negotiations and this is what we're going to do so we're saying you don't take any risk but you're looking for a result and what is the result that you want well you want to be able to drive new customers you want a business result I like those kinds of challenges because they're measurable versus I want to feel like it's a good video now I wouldn't do that deal so business result so what we do is we establish with a customer what is your Baseline because we need to measure the Baseline and we've talked about this before these are what we refer to as the 2bs something I came up with not the two 2 B s's but the two BS okay the Baseline and The Benchmark this is an important conversation to have with any client we have to know where you are and where you'd like to be where you are is the current state okay so I'll refer it to as the Cs this the current state and then we want to go to the desired future State desired future State and we all live in this place where we're trying to grow we're trying to improve our health our relationships we're trying to improve our status our wealth our identity we're trying to always grow from where we are that's the struggle of life and that's real okay and so we say okay you want a business result so what's the Baseline so we establish something we say something like how many customers are you getting per month on average so we would say last year 20 23 let's say for example look at all your customers divide that by 12 and come with a number so we can just make up something right now let's say it's 30 customers a month and we say how long have you been stuck at 30 customers a month and they would say something like for many many years so we established the need to grow otherwise we're stagnating we're stuck in a current state makes sense what's the Benchmark well anything above 30 would be good so we have to ask what is one new customer worth to you each person is going to have different answer so in in this case what do you think one new customer is worth to this person in their business maybe like 100 bucks 150 bucks okay 150 bucks let's use nice round number so our math is a little bit easier let's see either 100 or 200 what do you like let's go with100 $100 okay so one new customer is worth $100 now I have to introduce A New Concept for all of you to kind of ponder and it's something that's very fundamental to all businesses and a concept once you learn you look at businesses differently are you familiar with the concept of Lifetime customer value I've heard of it okay so let's break that down then okay so we're going to say lifetime customer value so how do you determine the lifetime customer value so when a customer goes into a brick and mortar place the first time they go in they spend some money if they like what they get a coffee a doughnut maybe a tuneup for their their car or something whatever it is that they're doing then they're going to say like I'd like to come back and I might even tell friends but we're not going worry about the referrals we're just going to say like how much money do they spend as a lifetime and the way you would calculate that is you would take your gross revenue okay it's simple way to do it simple which is you take your gross revenue which is all the money you made in a year let's say in 2023 for the example here and we divide it by the number of total number of customers not hashtag from that year and we should come up with an average what they spend so dgo let's get into your business now let me change colors one more time here because you know why cuz we have colors let me go with green so so we we'll take Doo's business for example okay let's figure out the lifetime customer value for your business so I'll write dgo here okay let's take 2023 what did you gross in 2023 we did about 250,000 okay it's good number 250k okay and about how many customers did you get 36 clients 36 clients okay and you could even be a little bit more uh we can make this a little bit more complicated we can throw out the bottom two clients and the top two clients because they tend to skew the numbers so if a client gave you $25 and you accepted it this would really skew your number down so we call that Olympic scoring so out of 10 clients you take away the top two highest scores and you take away the bottom to lowest scores but for this sake let's just stick to this so you had 36 customers that you serviced in 2023 so now we're going to divide $250,000 divided by 36 and we' get what how much did each customer was were they worth to you 6,944 okay and everybody on in the internet gets mad at me when the math isn't right because you're sitting there doing the calculations you're not standing in front of whiteboard that's blank so roughly 7K it's very close to 7K so we can just look at it like that so every customer is worth 7,000 to you more or less now what would you say your your profit margin on this is your net so the net there's two numbers you need to know you need to know gross profit and you need to know net profit and the number that's most important is net profit net profit means after all of the vendors have been paid after you paid yourself a fair salary for someone who is doing your work meaning if you had to replace yourself what would you have to pay them you take away all your overhead you subtract all that uh any subscriptions licenses insurance that you have anything that it cost you to run your business that it's not even attributable to a client you would have some number so what money was left over so of the 250k what was net for you I'll say to keep it around we'll say 50,000 okay so that's your profit and that's good because you need to have profit and a lot of people don't understand that they think by working all of this is profit so they and I I thought this at one point too 250,000 is how much I profit it's not even if you're solo operation it's not what you profit okay this is a good number so 50k is what percentage of 250 so we know what your net profit margin is 20% yeah so 50 250 that's like5 that's 20% that makes sense so it's 20% profit margin and we need to know this because if you spend more than 80% to produce any gig you're going to start to dip into your profit margin and eventually run out of business so here we go so 20% so this is your lifetime customer value it's here lifetime customer value with the netet margin of 20% so of the $7,000 per customer you're making 20% of that which I believe is about $1,400 for every customer okay so if every customer you can net profit $1,400 we have to figure out something out which is something that's a Brand New Concept which is the cost per acquisition how much can you afford to spend to acquire a new customer have you heard of cost per acquisition before yes okay that is I believe cost per acquiring a new customer I want to say CPA but I think it's CPC interet correct me if I'm wrong that's the cost per acquisition So currently in your business how much do you spend to acquire a new customer nothing you said nothing okay that's a pretty fair answer because a lot of people spend nothing too okay in most businesses they look at a lifetime customer value of 7,000 and as long as they're not negative on this number they will spend that number all day long that makes a lot of sense right so for example if you sell a widget let me change colors again if you sell a widget uh let's say like um what can we buy on the internet headphones okay we'll buy headphones on the internet you manufacture headphones okay those are your headphones all right let's say you sell them for 100 bucks your your margin should be about 50% meaning you have $50 to to produce it and whatever ever you sell it $100 the rest is profit so it'll be about $50 in profit so $50 produce it $50 in net profit so now if somebody told you would you be willing to spend $45 to acquire a new customer what would you say yes why would you say that because it's less than what it like my my profit I can make the money back well what money would you make back they the customer pays $100 and you spent $45 to acquire that customer through marketing campaign sales and all that kind of stuff that leaves you with $55 left right that's why you said that number but you also spent $50 to produce it okay and that would leave you with how much five bucks five bucks so I'm gonna ask you again would you pay $45 to acquire a new customer I want to say yes but just be honest just say whatever it seems like it's a lot of effort to make $5 what's the effort having to produce manufacture Market the product to make $5 okay let's let's break that down because this is where I think some of the entrepreneurial conversation is breaking down within our audience or Community they don't understand I I think pretty bus basic business fundamentals that we do that today once you understand this you'll be able to make a lot more money you'll be able to have a informed conversation with your clients about real business okay you have an assembly line theoretically you can't make an infinite number of these but you can scale this up pretty fast right all you have to do is say manufacture more so if you spend $45 but you take back $5 $50 and you pay some company to Market it you have basically an ATM machine that just spits out $5 and all you have to do is say spend more money in advertising so in this case let's look at this does this scale if we could spend a million $1 million right with this basic model right so for every $45 you you make $5 so let's divide 40 a million divided by 45 and then you'll start to see like how much money you're going to make okay so what is well what we can do is we can figure out for every $45 you spend you'll make five bucks I think you would just say dump as much money into this as you have possible and you just keep pulling $5 dollar back out you this all day long in fact people on Wall Street do something called microtransactions do you know what these microtransactions are okay this is kind of weird thing about how Wall Street works okay I want to buy a stock okay and I'm going to say I'm going to pay $1 for that stock okay and what the computers do is they buy that stock for 99 cents and they sell it to you for a dollar they make one cent they actually don't even make one cent they make a percentage of one one cent and they're doing this at such great volume that they're all billionaires so you can see it doesn't really matter the number if this scales even at $5 you would spend that and the the reason why I bring this up right because we're going to talk about this is we have to start thinking like real business people we don't have to get emotional about how much effort is you're mapping this to production and creative Services you're like well I don't want to run my creative services to make $5 that doesn't make sense and I agree with you but what we do is if we were to scale this up if we made this $50,000 but you had to spend $150,000 you would probably say yes now so it's just a matter of Economics but the basic principle is as long as you can spend less to acquire a new customer than what your net margins are you should be happy to do that deal all day long in fact millions of businesses Across America in the world do this all the time that's why there's a term for it's called the CPC So currently you're not spending any money at all to acquire a new customer so if I told you okay um I'm I'm going to be an agent or rep for you I'm going to go and sell your work because I know a lot of customers would you be happy to have me do that for you yeah I would I'm pretty sure almost everybody in the audience would say yes I want that deal help me out Chris because what do we all want we want qualified leads so if I set up a deal where I I only take a percentage of the work that you book we now have to just figure out what percentage you're willing to pay me right let's do this a little bit differently some of your customers and this is a problem where if the lifetime customer value for you is 7,000 I know you have other types of customers that pay you a lot more let's examine that okay so if you think about your ideal client your customer who would that be don't don't say any names but just say like what type and then we'll talk about how much you're getting paid or or or category okay let's keep this fairly abstract so we don't harm the innocent here entrepreneurs entrepreneur thought leaders thought leaders uh public speakers people that want to you know get their name out there okay so people who want to build Authority and create content they're naturally going to want to spend money we've heard Heros spending in excess of40 $50,000 per month alone and then Leela spends the exact same amount so they're spending say 50 Grand a month a piece they have no problem giving people like you money okay so we know that in those spaces a typical deal for like doing some content is about $3,000 a month is that does that track with you more less a little bit of a lower end yeah 3K what do you want to say I say I say 3K is like on the bottom end of things okay so we we'll just leave that it's just a number to talk about okay but you'll see how this changes all of your business thinking okay so let's say the people who want to make content will pay you 3K a month now we know in our audience if you're in a developing country 3K a month is like what you can survive on for half a year so to get that a month would be mind-blowing for people so this is why I keep telling everybody everyone can make $100,000 a year no matter where you live if you learn this skill and understand this business model this is not me juicing the video this is not CLI this is real stuff I've seen it I'm involved in these things and I talk to people there's plenty of people I know who are working at this and much much higher we know that okay so we say a customer comes to you and hires you to do this work it's 3K a month so that means if we multiply that by 12 that customer is now what's the lifetime customer value of this person for the first year first year it would be 36,000 36,000 bucks you got it so if we look at this number compared to this number now we know there's a problem some of your clients are worth $36,000 some of them are worth seven and sadly to say some of them are worth much less than this because this cannot be the bottom because then your average would be much higher than that so we have to make some business decisions moving forward if we want to continue servicing these types of clients critical concept because I'm already doing the math in my mind yeah that you're servicing way more clients at this number and lower and it's messing your business up okay because my my goal for you is for you to get to a million dollars sooner than later per year and right now you're at 250k you would have to do four times as much business I don't believe in the current state that you can handle four times as many customers you're going to lose your hair we don't want you to lose your hair okay so that's I'm just telling you you want more of these types of clients and less of these types of clients which I think you understand right okay and everybody's like wait are you guys confused leave it in the comments I'll try and sort this out I think Dr will just try to mess is up here on purpose I don't know why okay so now if I say I'm going to go out there and I'm going to be your your sales rep which we've worked with in the past for over 15 20 years we were happy to pay a sales rep to go out take our portfolio meet with clients and convince the clients to give us a shot at the job it wasn't a guarantee we'd have to still pitch and win but at least it was worth something what percentage of this amount this $36,000 would you be willing to pay a sales rep for every new client they brought in remember this represents one new client just for the first year okay because some clients if you do a good job will last you multiple years or at least way more than 12 months that's just one new client okay everybody just keep this in mind right how would your life change each and every single person right now in the audience if you had a client who came to you every single month and just paid you $3,000 this is why Ron Ronald J Baker talks about getting subscription models as the ultimate way that we should all price professional creative Services because you don't have to worry about acquiring new customers all you have to do is worry about giving and creating value to your customer that's it that's what your sole Obsession should should be okay how much what percentage of this $36,000 would you be willing to spend for every new customer that somebody like me could bring to you I say 10% 10% okay so 10% that would be $3600 right yeah so you're going to pay 10% this would be your cost per acquisition for a new customer would you be happy to do that yeah if I you know if I knew I was going to get a client that's going to be there for a year whose fault is that I guess that's my fault well that's your responsibility that's not the the responsibility of the the agent so if I told you tomorrow I'm gonna give some of my friends a hundred clients that will spend this amount of money would you like to be the first and last name on that list I love that and you would be willing to pay 10% yes you should say emphatically yes because I know people in our audience would be dying to do this many of them are probably going to be typing in the comments I would give 30% I'd give 40% because I can run these projects all day long and it would change my life this is what broke ass designers don't understand you got to spend money to make money money makes money okay and scared money as as Sean Canelo will say scar money don't make money and in the case with mo mo was scared to spend money he wasn't willing to spend money in any direction at all he didn't want to pay upfront he didn't want to pay percentage we'll get into all that stuff later okay this is a big concept for you all to understand now in my days working with a commercial sales rep and we had them covering Us in the west coast Midwest and East Coast we had one in Europe and one in Asia so we had five different sales reps going out there to find us work and they worked until we got a job okay so if the sales rep what should we draw to to represent a sales rep here what does sales reps look like let's give them sunglasses okay let's just say that they're too cool for school okay there's a sales rep Joe Cool okay Joe the sales rep does not eat we'll put we'll give Joe a cap because you know to make them look a little different Joe does not eat until you eat right right okay so Joe also eats the smallest part of the pie so I'm going to get messed up here because people always say like you know that's 25% Joe gets 10% so that is um 25% that's 12 and half% Joe gets something like this this is the part that Joe gets if I'm doing my math right about 10% of the pie hrio gets all of this so hrio takes the Lion's Share of the revenue Joe takes 10% of the revenue so Joe gets oneth who's taking the risk when when this situation is set up right now Joe is why is Joe taking the risk because he has to go out there present himself he has to go talk to people he's spending a lot of time to try to get me a possible gig and then I still have to close it Joe assumes most not all of the risk look at what Joe has to do I'll be Joe right now I have to make phone calls I have to go on a meet wine and dine I have to present and present and present somebody wants me to go there I got to go there and I have to just keep doing this until I get you something that you can win let's say I find five clients for you and then you talk to all of them and you can't book a single one I've wasted five opportunities that's super risky for me does that sound right right let's say I I have great clients that love me and that respect me and and Trust my recommendations and then I send the client over to you you pay me the 3600 and you f up the job you're not professional you don't communicate you do subpar work and then that client then comes back and says hey yo man your people are not good what does that do to my reputation it damages my reputation so when people are watching that video they're saying well the salesperson or the guy who makes the video takes no risk they don't understand this at all to work for free in hopes that you will get a new client that is risk cuz right now you can run your business and spend zero doar as you've admitted to acquire new customers and here I am out there trying to get you work again people need to understand this so when we were working with sales reps I think we were doing anywhere between seven to 12% of gross revenue to pay them depending on who they were how hot they were and how desperate we were to get them we were happy to pay this and we built a multi-million dollar business using this exact model on an average Year my client service company called Blind would do about $5 million in Revenue a year so 7 to 12% of that off the top would go to all the sales reps this is how business is done and in fact we would be happy to pay more if they just brought us more work Amazon one of the richest companies in the world will pay you hrio a relative nobody 4% of all the new business and why would a super successful company do that this is how they grow their business and in fact the more you sell the higher your percentage goes did you know that yeah so it will go up I think to 7% and I don't even know because maybe there's echelons I don't even know about so people who are selling millions of dollars for Amazon they make a higher percentage because they want to reward them to sell even more it's pretty wild right this is part of their business model so they're happy to spend the CPC of 4% of all purchases that you refer people to their margins are such that they can still make money this is how real businesses run so the the elephant in the room is dgo why do you spend Z on acquiring customers somehow you get customers today and so we have to start to unpack that okay so why don't we dive into that and I think that will be I think valuable for the people who are watching because they're like okay great Chris we don't have a sales rep and no one wants to represent us so let's take that deal off the table I wanted to set up context so people understood because they're like how is the videographer in this case taking all the risk I hope you now understand why they're taking the risk because they're willing to do work for free for as long as it's needed until they get results let's go back to that model okay now we know this okay so I think in the example here Mo I'll write Mo here Mo the customer so he runs a brick and- mortar shop right and he has a baseline of 30 new customers coming or 30 customers coming in all the time and he's like I'm stuck I need help so he wants to have a video made which is right here Banger video a or video as a kid say that's going to then drive traffic and we don't care what the video looks like what we care is did one new person come in now here's the weird thing let's just say the Baseline is 30 but some months they get 27 through no fault to the video we're now already negative3 so the video sends in three new customers he's still at the Baseline of 30 a month so who gets paid MO is not or the videographer doesn't get paid you see how complicated this is conversely if 33 of his existing customers come in and the video sends no new customers guess who's going to get get paid the videographer is going to get paid because we set up a baseline of 30 and anything above 30 he gets a percentage up now in the video as an opening Salvo because I didn't want to work with his client at all I said for every new customer I want you to pay me 50% okay so in this model we're not referring to that video now for every new customer above 30 one new customer number 31 you would pay me what 50 bucks 50 bucks every one above 30 you would pay me 50 bucks so in order for me just to get the money I was supposed to be paid how many customers would I need 20 20 okay right because 20 Time 5 is 10 that would get you $1,000 right so that means it could take months of work now we also know something when you create a video it's not just creating a video there's other things involved first of all you have to figure out what channels to post it on you have to come up with a good title that's SEO friendly and this this word is going to come up even more and you have to design a good thumbnail right something that's hot you have to have descriptions and that's not enough you have to create a campaign to drive people to watch this video assuming the video is going to get people to go to the store we have to use social media to drive so we have to make more assets to send it to the video to get people to watch and you know this as well as anybody else we have to look at the analytics and make sure we're optimizing the video so if it doesn't take off we're adjusting title we're adjusting thumbnail we're doing everything we can to juice the performance of this thing because our livelihood we have to get to this point in which we'll at least make $1,000 and then some people are saying well when you get paid $1,000 the deal is off is that is that a good deal well I mean positive geographer no why not well because I took a lot of risk I mean you put some things on there but like there's a pre-production there's so much more that goes into it so I think for someone that didn't want to pay I'd want more money but what's your rationale there's a real reason you haven't said it yet because it the effort that goes into it no because the initial quote that you gave was for $1,000 that includes pre-production that includes all the stuff so you just got what you were supposed to be paid but why is that no now no longer enough because I have to care about the results as much as a business owner does yes and no because who took the risk if they paid you a th bucks the business owner who's taking the risk now I am so in in business all profit comes from risk Peter Ducker okay look that up in business all profit comes from risk so whoever is willing to carry the risk makes more money makes sense mhm right right okay so when we invest in a volatile stock that has a potential to Moon we're taking a lot of risk we already know this yeah the reason did you invest in Bitcoin early yes like how early not that not early not $50 early no not the people who invested in Bitcoin at $50 how much risk do they take not a lot no a ton a ton yeah because if you invested in any one of these other I don't want to name them these um these other alternative currencies yeah Dogecoin they're worth nothing let's say you bought a bunch of nfts who Took the risk people buying them people who bought them see only after the fact it doesn't look like a risk because hindsight is 2020 but people had told me to go buy Bitcoin I'm like I'm not interested I don't know anything about cryptocurrency I don't get involved in this at all I'm going to go earn my money the hard way okay so if you bought Bitcoin or cryptocurrency well it has a chance to make a lot of money but you can also just set your money on fire that's the risk you take right now if you invest in a mutual fund that gets you a couple of percentage points in return your money is relatively safe who's taking the risk no one's taking the risk so no one's making the big reward because they're making a lot of bets the way that um mutual funds work is they invest in a portfolio of companies they they hedge with some companies that do well and some companies that won't so hopefully they're covered so it just trucks along okay and if you want to take very little risk you would say invest in S&P 500 so you're buying an index fund of 500 companies over the history of the stock market continue to move up never like terribly down okay so now you understand if you take on the risk you need to make more money than that so the last part of this that we had to figure out is what percentage is fair to pay the percentage and for how long this is an hourglass okay how long is the question mark So I said imp perpetuity forever which is a neg negotiation point just like the 50% so the business owner if he was a good business owner it's like you know what 50% is a little bit High why don't we bring that down a little bit then we'd have to look at that and imp perpetuity seems really long what's fair we would just negotiate that so I would say then okay we could reduce the percentage okay we can reduce the percentage and what I would say is once I get 5K we can reduce the percentage further or why don't we first say the first 5k is 50% % the next 5K is 40% it just dnds down until I get what I want so it could be one of these collapsing Comm conditions that would be okay too everybody makes money okay so like play devil's advocate here like I think for a lot of us seeing this be like whoa you got to make 5K now on the video that you're going to charge me $1,000 how is that fair why don't you pay the ,000 in the first place if you think it's a sure done deal and the whole point of setting up this deal was to let them know that $1,000 is really cheap just pay the $1,000 already you cheap bastard just pay it you don't have to deal with any of this stuff so is that why you chose those numbers 50% because I'm gonna take the risk if you don't want to pay if you don't pay upfront you'll pay some way and guess what everybody assumes the positive here right what if in in nine months this doesn't go I've not only wasted my energy and effort that was worth a th000 bucks but in the months of track in and trying to figure this thing out I just can't go anywhere maybe you're a horrible business owner you're like a cranky old person behind the counter every new customer walks way upset they just assume it's going to go well if you assume this is going to go well you should just pay the thousand bucks it's real easy that way right so let's put this in the real world I commission artists from time in time to make artwork for me there's usually two models the flat fee buyout I'm going to just pay you fee and then you I own the artwork as a work for hire you and I are used to this meaning I own the work you don't own it anymore you transfer all rights to me and then there's a licensing deal where it's like for a period of time you can use it for these markets and these applications usually three things how long which markets and for what applications right and usually that price point is going to be lower the smaller the market the shorter the usage and the fewer the applications the price will be a lot lower so if I don't want to take risk I go for that option but then I say to myself but what if this takes off I'm beholden to continue to pay this person beyond the initial contract point I can't have my cake and eat it I can't say well let's go for the lower commission or license rate but if this blows up I need to buy it outright and it's going to be less than what you're going to pay wouldn't that make sense does that you jive with that okay that's why okay the reason why people are having this argument in the comments is because they don't understand business fundamentals I don't care who you say you are show me your receipts okay show me what you've done and then tell me you you understand this and and this is a stupid idea okay the whole point of this is I didn't want to work with this person I needed to find a different way to explain this to the people so they could understand and this is viable for many people for every one not informed critique of this there are a handful of other people probably a ratio 5 to one who who contact me it's like I'll do the deal what you talking about I need clients I know how to make money on this maybe they can use software they can Farm out to a bunch of people and they can they know how to make money this is how this this is how this works in real business all throughout the world so like how do I know that the business owner is going to be up front with me okay that's a good question so there were a lot of questions about that in the comments about like how can you trust this person if say you like this person and you trust them you have a good cut feeling do the deal have a contract signed up have a way to audit the books so there's two things that are going to protect you let me WR this in a much more obvious color so that we can see you need a an attorney to draft up a contract and B you need a way to audit the books in case you feel like something's funny okay and then lastly you need a way to resolve this in court if a dispute comes up okay if we both can't agree for whatever reason and I look at your books and there something funny we're both going to agreed to arbitration or small claims court or something like this we don't want to spend our time doing that now if we have a funny feeling I don't care how good the contract is it's not going to save you you're going to sit there and you're going to try and chase after this person they're not going to pay you for years your life is going to get shorter you're going to lose your hair you're going to turn gray whatever it is you don't want to do this okay as I'm talking about contracts I want to make the audience aware of something that we have something called the legal kit which is the collection of a master service agreement independent contract agreement work for high agreements um model release forms something that I've paid my attorney a ton of money to make and make it appropriate for a creative industry and it's something that we sell that you guys can get you can purchase that if you want that's a good starting point and some people always ask like is it good for this Market or like for the UK not exactly but it's a good starting point and for what you're going to pay for it it's better to start with something like that and have your attorney modify for what you need I always say because I'm an attorney consult an attorney a legal professional before you do any of this stuff but I got to tell you for years we ran a business without legitimate legal cont contract and we got away with it most of the time every once a while it came back to bite us and I wish we had just spent the money because it costs way more to resolve than it was just to hire an attorney or to have contracts ready for you okay okay now the the the buyer of the video some people are like well what if the video sucks well what are we going to do about that well the buyer has an opportunity to review the body of work so where I'm gonna draw up here a portfolio case Okay so this is a portfolio case of video work and you can look at that work and say does that feel like it's right especially if you produce videos like this before that have results for brand names if you're the person who made the Dollar Shave Club video or the purple mattress or poopery you're going to charge way more than a thousand bucks they have all the proof that they need like we know how to drive sales in fact our last client did $184 million in sales based on this video take my money already okay so you have to discern use your vision and say is this right and short of them doing something that is misogynistic homophobic transphobic or something weird racist sexist they should be allowed to do whatever they need to do to make the video because their butt is on the line because if they make a stupid video that drives customers away they're not just working for free for no good reason at all most people don't have that kind of free time so they're going to try to do their best job given the information that you provide let's go to this idea because I know people are sitting here thinking okay what what kind of guarantee they're saying well you shouldn't be paid anything till the work gets results right like well okay well let's talk about that the the the analogy I can think about is like let's say a car you buy a car a decent car let's say the car cost 50k okay and many cars these days will come with a four or 5year warranty 5year warranty and you know what the warranty covers manufactur defects that's it if a rock hits your window and it breaks who paying for that you paying for that this has happened to me literally bought a brand new Benz it's driving home hit a Gant normous pothole jacked my wheel the rim was IR irreparable okay 5,000 bucks I'm out literally within 24 hours bad Road I drove on lowprofile tires combination not made in heaven I have to pay for that what they're saying is if the transmission blows up if there is an electrical malfunction or something the stitching on the on the seat falls apart basically if it breaks because of of anything other than user error they'll take care of right so there's no guarantee the guarantee is it'll go from point A to point B that's about as much as a guarantee so what happens if you hit another car or if forget about hitting another car let's say you run into a lamp post and you you just mess up your car who's responsible for that I am you are so we know this so what we what do we do then we buy insurance we buy insurance right so you're going to buy insurance and how much money do you spend on insurance a month uh like 200 bucks okay 200 bucks a month you're a good driver okay so you spend $200 a month and you can also buy something called an extended warranty which debatable some people say absolute and some people like never do you buy extended warranties I have on my car you have all the time yes it's good purchase or no it was for me okay we should have bought the warranty for our Tesla but that's when the batter shots getting crazy and that gets 25 Grand to replace battery I'm like shoot might get in a car yeah so the warranties are funny the day after it expires you can't buy it anymore or they might have a grace period of like a week but it's really wild to buy the extended warranty I think it's usually like a threeyear warranty right I actually bought my to cover my card 100,000 miles oh okay to a distance then okay so why do we buy these things do you plan on hitting anybody nope do you plan on people hitting you nope okay do you do you plan for the engine to explode and fall apart on you definitely not so why do you pay for these things I guess in case stuff happens okay in case stuff happens we call this peace of mind you're buying peace of mind we don't want anything to happen we don't want to ever utilize these two policies we really don't they're just in case something happens and in case something happens is we're worried about um Financial catastrophe meaning you get hurt in your car and you're in the hospital you cannot work your your arms messed up your vision's jacked you got aund $200,000 worth of hospital bills you think to yourself thank God I bought this thing and there's usually a dedu able on this right and it's usually kind of high what is it for you do you know oh mine is like a th bucks a th bucks so that means that anything less than $1,000 worth of damage you're still eating so these policies are written because they know that most people don't use them and they just make money to cover every once in a while somebody really needs it and they cover that so we're sharing risk across a network of people as long as the company doesn't spend this money foolishly on risky Investments it's solid you're going to they're going to take care of you that's how this works they're usually like backed by the government too there's some some extra protection and they regulated and all that kind of stuff so when we talk about a guarantee even these aren't that solid a guarantee but that's what you do you pay extra for Guarantee so in a case like this you are just buying a video to expect a guarantee to come with it it's like to expect to buy a car that it comes with insurance an extended warranty and everything that you can think of the car drive they fulfill their job we know what a video is if it's a certain size spec audio quality is good color grade is fine you've delivered your job everything else on top of that is not a guarantee if you want a guarantee what should we charge then a lot more money we should charge a lot more so in a case like this if he's like I want guaranteed results well what kind of guarantee do you want well if you don't send me a new customer I I want my money back so you want a money back guarantee based on a customer so depending on how how many customers they want how strong the guarantee has to be this number will go up and it can go up exponentially now some people are also saying Chris 50% is lunacy it's outrageous it kind of is and they knew that fully expecting them to negotiate with me but I'm not going to negotiate myself to like 10% right away then he'll say 3% this is where we're going to get stuck it's like I don't want to work for 3% it's not going to make I'm going to make what $3 how many jobs do I I have to send you 00 new customers before I actually see any kind of real margins on this doesn't make sense for me but some people are willing to pay 50% that have really high margins Insurance real estate they have high profit margins they can afford to spend a lot of money to acquire a new customer because their hard costs are very very low telecom companies credit card companies they spend a lot to acquire a new customer you'd be shocked at how much they're willing to spend because a they know the lifetime customer value is really high relatively speaking especially with people who are poor at money management and they're willing to spend money that's why they're taking out ads on TV on YouTube in print they have promotional campaigns at the airports with your airline everywhere you turn somebody wants to you to sign up for a new credit card because they know this is a money-making business for the most part what we need to do is we need to expand on why this is and what else you can do so how do you get customers currently because you are getting customers right right yeah so let's try to do this in a prioritized list and we'll rank them okay can you do that in your mind M okay let's look at this like number one what is the number one which way you get new customers uh seo seo seo yeah we do it ourselves okay you must be very good we're pretty damn good how many of the 36 customers that come in a year come from SEO approximately 60% of our clients let's say 25 so 25 customers come from that and on average what do they spend with you about 5k about 5k okay so all right we'll get into that later and they're they're one and done or they're ongoing subscription base those are kind of one andone okay that's there's two problems that but we'll get into it what's number two number two is going to be through content okay like Social Media stuff yeah so we'll call it social media marketing you're posting on IG talk that kind of stuff and that creates how many customers for you five clients for us five clients okay so you're getting five clients from social media typically what what do they spend those probably around like 3K so even less yeah are they recurring or just one offs too those are more recurring because they see us doing social media content for other clients and that's okay what's the lifetime customer value then we we need to look at lifetime customer value I would say probably like 12K then okay that seems a little bit more realistic to me yeah okay we have to fix that problem too so you're saying 3K times like in three months right right okay what's the number three way word of mouth okay like referrals yes okay so w so an existing customer tells a new customer hey you should work with dgo or they say who do you recommend right yeah and so this is where it gets real interesting here so when you get a customer that's coming Word of Mouth do are they worth more to you yes and so let's put a lifetime customer value on them 7,000 7,000 yeah okay well it's still less than this one okay let's point out some of the problems here and I'm sure everyone who's following along was really paying attention at this point is already seeing the things that I see and so we're going to switch to the red marker here if you run SEO and you're really good at and you spend time doing it you're going to get $5,000 from 25 customers it is already below your lifetime customer average and we know this to be true because we have to have some clients that you're working with that are less than your average here's what I'm saying to you at a minimum 7K should be your new um minimum level of Engagement no clients can come to you at this point and hire you for less than that because that's the only way you're going to average this thing up so that has to be your new Baseline so when a client comes calling it's like I have 5K it's like it's not going to work to start it needs to be 7K but we only work with customers that are going to spend minimum of 12K with us throughout the year not all at once but that's our new minimum level of Engagement so we we have to do is this has to be the Baseline but this is not good we need to go up from there okay we got to go up let's just use big round numbers at this point I think your new minimum level engagement uh dgo needs to be 15K needs to be 15K and you need to be clear about that and you need to be position in the market to track these kinds of customers is that clear to you yes if you have any chance let's do the math real quick let's say this is your new 15K multiply that by 36 and what do we get then 540 540k how does that sound like what what 2024 would look like for you better well that's double what you're doing right now right you were 250 so we can see now by designing our business being intentional about what we do we can change our business so I think that's a fairly good goal for you to try to hit for 2024 so that you can be on your way to a million so if I were to map it out for you right now 2023 we're talking about 250k 2024 we should get you to 540 guess what we're going to do in 2025 it gets you to 1 million that's the plan so we take small steps towards getting towards our goal and we have to learn new skills in order for us to get there and I think almost anybody who's got a good work ethic who has some sense of intelligence and is willing to follow the steps that we're outlining you all can make a million doll or more I know because I've done it multiple times even within years out of school I've done it so how do I get like from a word of mouth client that's 7K to offering like my services for 15,000 I love to tell you would you like to know yeah okay we'll do that on the next video we're going to cover what jal's business plan needs to be in order to do this we need to figure out his game plan because a lot of times we'll talk about this it'll feel clear to you and then people go away and they do nothing about it and they're like well I don't know was inspired but now I don't know what to do so let us know in the comments below do you want to see that video just tell us make that video already and you want to see it just type in want hash want and we will make this video we'll go through jle step-by-step plan so that he can start to prioritize his business and we'll show you how to do it is that a deal everybody all right thanks for watching don't forget to click like And subscribe see you guys in the next video if you want to equip yourself with the right Community training and resources to take your business to the next level I want to personally invite you to check out the future PR group and our membership specifically created for experienced business owners ready to scale [Music]