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When people have a cost of goods when they're like, you know, and it's selling smoothies, they're selling products, right?

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They usually tend to be more aware of their margins. In service, we just exist as though time is free, right?

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Our time, our employees time, is all free.

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Welcome to the Jim Secrets Podcast where we talk about how to get more customers, how to make more per customer, and how to keep them longer,

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and the many failures and lessons that we have learned along the way. I hope you enjoy and subscribe.

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Good morning, everyone. Happy Saturday. I'm going to get some light going on here for a little while watching him.

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Yeah, there we are. Nice sun in my eyes. That'll be sweet.

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Anyways, margin madness.

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It's one of the things that I want to talk about today was something that came up last night.

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While I was thinking, I was talking to one of our partners on the Allen Agency side,

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and this is a mistake that Jim Wonders make, that agency Wonders make.

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Anybody, anyone who's in business makes, especially when you're starting out, and I made it too,

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let's all tell you a story just to illustrate the example and a couple of principles that you can take away from it.

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When I was 15, 16, 17, I was a blender tender. It was my first or second job in high school,

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and we would make smoothies and all that kind of stuff, right? It was that smoothie king.

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The owner, Steve was David Lindt, nice guy. One day, I understaffed one of our stores,

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and so I was working at the store, and so was the manager at the time, Chris, so I was new.

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This huge two buses full of teachers or students, it was a horde that walked in the door.

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After they had all made their order, he said, hey, everybody, just because you guys

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such a big group, we're just going to give you guys 20% off, just to say thank you for all the

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business and whatever, and we made all the smoothies, and then the rest of the day was normal,

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and then Dave came by that night and saw the huge order, and then saw the discount because you

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go through the receipts, and he was like, what's this? What is this 20% discount? What happened?

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What did they bring a coupon for everybody? What happened here? He was like, no, it was a big

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big group. I figured I would just give him a reward for bringing so much business. He was like,

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you just gave away our margin. That's all I was trying to make on these drinks. He's like, we don't

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make 100% of the money that we bring in. This business runs on 15% margins, and you just gave the

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whole margin away. That's it. All of that work that we did, we didn't make anything from it. I remember

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thinking about that, and it was the first time I was 15. I was super young. Some people were like,

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I was making a lump of eight stands when I was 10. I wasn't that way. I was in school and stuff.

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But I remember thinking, I was like, huh, revenue isn't profit. It's just like an interesting moment,

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but what's wild to me is that, despite that, especially in the services space, because when people

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have a cost of goods, when they are selling smoothies, they're selling products. They usually

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tend to be more aware of their margins. In service, we just exist as though time is free. Our time,

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our employees time, is all free, especially when you have grouped together services like fitness,

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or, I mean, really, most services you have clumped up work. I was talking to H.O.

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owner last night, and he was saying, yeah, I've been bringing these people on. He was discounting

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what he should have been charging. My first biggest ask to you right now is stop. It's such an

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easy sign of a newer green business owner that you negotiate with terrorists. If someone comes in

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and says, well, I can't afford that, they can. They just don't think it's valuable enough, and so

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you need to work on the skill of selling. You don't need to change your price. Your price is not

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negotiable. Your price has been predetermined based on what you want to make per product XYZ.

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If you know that your margin is 20% when you're charging $100 a month for something, whatever it is,

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right? If you want to double that, then you, all you have to do is get to $120, right? Go from

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100 to 120, and you have to always operate in that mindset. One of the biggest traps that you can do

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is operate in a fixed cost mindset, which is like, well, I'm already covering all this stuff,

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all of this extra money that comes in is going to just be on top. It doesn't work that way, right?

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It might work the way in your head, but if you can keep the discipline of every one of these

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$100 a month customers that I'm bringing in right now, or $1,000 a month, you can add zeros. It

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doesn't matter, right? Customers that are coming in right now, I know that I'm only making X on it,

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right? You know what your margin is at the end of the month. It's 15%, then multiply the top

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line by 15%. And then all of a sudden, you'll be far more protective of your price point, right?

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It'll be far more protective of your margin. And so the, like my biggest ask you is that when you're

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looking at your pricing and someone does have some sort of, you know, pushed back to you,

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like you should be able to push right back and be like, do you think we make 100% margin here?

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Like I have cost of doing some business here, right? And like, that's how this works. This is

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the price that we already have. Now, if we can try and figure out, you can figure out a payment plan

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if you want to do that. Now, again, with payment plans, you should bake in the fact that you

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were taking on risk, right? If someone's saying, you know, your, your thing is $400, I'll pay you

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$200 twice. If you want, and you know that the second payment, you have a certain amount of risk

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that that's not going to happen, then it should be two payments to $250, right? Like you should bake

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in the fact that you're not going to collect all that money on front, which means you're, you are

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taking on risk as a business owner, right? Obviously, raise your hand if you've ever had or not up

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and down if you're listening. If you've ever had someone who said they would do a payment plan

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with you and not finished their commitment, right? Obviously, and those are costs of doing business,

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but part of the cost of your business is knowing those costs so that you can account for them,

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right? And so, I mean, gosh, I've so many stories about this, but big picture here.

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One, never negotiate with terrorists. Two, always know and think about your margin when you're

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talking about price with a customer. If you're at $100 and you know you make 15%, then 15

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bucks is all you've got, right? And so they're like, hey, can I just get a, you know, 15% off

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on this? And you're like, so do you want to run a nonprofit? Do you want to run and just want to

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do work for free? Because the end of the day, you could have just not done it and made zero dollars,

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too, right? Like just think about it. Like you could just keep on living your life and not do the work

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and also have the same amount of profit at the end of the day. And so like you have to protect your

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margin, you have to protect your profit when you're looking at your pricing.

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Hey guys, real quick. If you're new to the podcast, I have a book on Amazon called $100

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million offers that over 8,000 five star reviews and it has almost a perfect score. You can get it

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for 99 cents on Kindle. The reason I bring it up is that I put over a thousand hours into writing

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that book. And it's my biggest gift to our community. So it's my very shameless way of trying

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to get you to like me more and ultimately make more dollars to that later on in your business

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career. I can push the bar towards you. So that's my gift. Go check it out. Amazon and back to the show.

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And so the corollary to that and the flip side of that is that if you know what your your margin

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is right now, this is one of the number one things I do in any business myself included that I

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constantly reassess and I think it's one of the things that we do very well is that we look at

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what our margin is and then we say, okay, now we're running at x percent. Let's say it's 30.

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We're like, what could we do to get this top line up by another 10% 10% in aggregate. So from like

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30 to 40, not, you know, you know, you know what I'm saying here. So 25% increase going from 10.

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So from 30% margin, just adding an extra 10% on top of the price, what could I do

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that does not require me to take on more overhead? What could I do? No more thing,

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it just learned how to sell that right? Number two, provide a payment plan that actually covers your

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losses that happened on the back end, right? Three, you can add a fee or an activation or an enrollment

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like all of these things are things that you can tack into your business to boost margin, right?

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If you look at and that I'd highly encourage you to study some of the super established businesses

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out there, go to go to budget rental car, right? See how many fees and enrollments and things like

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that that they've done. You can get upset about it or you can study it as a business owner and think

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like, that's pretty slick. I wonder if there's something something like that I can apply in my

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business, right? You know, at the same degree, look at telephone companies, right? How many different

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things to do? Okay, so they charge us for this, they do a financing thing for this, they have these

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add-ons, they have these separate accounts, they like all these different things that they bolt on

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because they know what their fixed costs are and then they just start bolting on top. And so

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the reason that I think small business owners many times do not make money and work all the time

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is because they do not protect their margin. And they think, well, it's just me doing extra,

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right? No, you make 20%, that's your take home or whatever it is, right? That is all that

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exists for you in this deal, make sure you protect it and never to negotiate with terrorists.

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So there was a study done by, I think, his Wattify and they were looking at the gyms that were

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the best and had the highest prices and highest margins and highest growth. And the ones that had

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that did not have any price discounts. Everyone paid the same price. There was no backdoor deals and

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I can tell you whenever I look at a new business that's coming in, it's always like, oh yeah,

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well we've got these guys who are at this price and oh yeah, I've got a special deal for that guy,

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oh yeah, I know his mom. They're telling me, they're telling me all the reasons that they

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have discounted and every time we get on the phone when I was doing sales back in the day. And I've

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been like, hey, give me your numbers, what are your prices? And they would say, oh, you know, we're

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$189 a month and I'd be like, oh, that's great. That's awesome. So how many customers do you have?

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They're like, oh, I've got $150. I'm like, oh, that's great. I'll say $100 for that. So you got

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100 customers. Awesome. So you're doing $18,900 a month and they're like, no, we're probably close

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to like a 10 or 11. And I'm like, okay, then how's your price 189? They're like, oh, well, that's,

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you know, that's what it's, you know, that's, that's what it is now. It wasn't always like that. And,

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you know, this guy, you know, I've got the first in a 80 or at $60 a month. So I was like, so you

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have like 10 people at $189. And the rest of your business is at 100 on average. Like, yeah, more or

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less, right? And so if you want to make the money, you have to be, you have to want it more than

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the person that is trying to take you from you by negotiating it away, all right? On the flipside,

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this is the evil side of me that comes out. If you're dealing with a small business owner,

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you can always negotiate the price because they do not protect their margins. And so I'll give you

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one trick that I learned from an old mentor of mine that you can use and take to the bank, all right?

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If you have any type of work that is ever supposed to happen at your business, you've got

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carpenters, you've got cleaners, you've got whatever, right? If for some, especially with building

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stuff, if for some reason they miss something, they mess something up, right? A corner gets nicked.

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So, you know, a door hit is a little bit off its hinge or it's a little, you know, a little bit

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crooked or something, something minor, right? You find that thing and right when they're done,

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he would say, hey, um, that looks a little bit off. And they're like, ah, you know, I mean,

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it's, it's about as, you know, as close as we can get to, it's like, well, um, well,

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what it costs to, you know, redo that and make it right? And at that point, they're done the work,

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right? And so they're going to be like, oh, it's, I mean, this is going to be, we'd have to

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redo the whole thing. We'd have to dismount and they'd come up with a whole bunch of terms and

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they're like, got it. So it would cost us at least, you know, at least 500 bucks, you know,

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in time and labor just to fix that, right? And they're like, huh? Well, that sounds like a good

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place to start for a discount. And I saw him use that move so many times as a people and they

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just like would eat their own words because they're talking, they're trying to inflate how much

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it's going to cost them to make this fix. And he's like, well, well, I've got to live with it.

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That sounds like a good place to start for a discount. And he would get it almost every time.

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And so, um, all that to say, you can also ask for additional things. So if you say, okay,

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well, I'll do that. Well, what else can you give me? I'll pay that price, but I need, I need a

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little bit, little, little something extra sweet in this deal, right? And a lot of small business

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owners were all for you to do more for the same price. And so, um, I say all this to say,

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be strong, understand how the game works on both sides, offense and defense and use them both

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to your advantage. Um, and so I, uh, most business owners just don't make money because they don't

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understand profit, right? That's it. They just, they, they still to themselves think that revenue

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of profit, even though they tell other people, oh, everything I make is a profit. And they just do,

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and I just don't know how to, I don't know how to draw the cent. If you know what you gross

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every month and you know what you take home every month, that is what in your mind should be your

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profit margin. And so when you sign up a customer for a thousand dollars or a hundred dollars a month,

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and you know, it's 15%. Then you should know that you're only making $15 a month in this person,

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and you should act accordingly. And you should also think to yourself, man, if I just added an extra

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15 bucks a month to this client, I'd make twice as much money. The answer is yes, you would. So,

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how can I do that? And how can I do that without taking on more work? So, um, I'll leave you with

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that from margin madness. I hope you guys have an amazing Saturday. Please drop a like or a comment.

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If you're, if you found this valuable at all, um, do not negotiate with terrorists. Do not lower your

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prices when people ask you for discounts. You need to stick and commit to your prices. And I feel

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like it's a matter of integrity of like, you look at yourself in the morning, like, this is what I

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am worth. Period. That's it, right? Period. That is what I am worth. That is what the service is worth.

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And until death, do you part or you make a strategic decision that for the next 90 days, you're going

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to change the price and hold it strong unless you make that, then you do not negotiate with terrorists.

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All right. So, your price is your price, period, and your margin is your margin and everything

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else is madness. So, lots of love. Have a amazing Saturday and I'll catch you guys on the flip side.

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Again, tag somebody who needs to hear this. All right. Bye!