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Part II: Make More Money

(Three Key Principles to Focus on Profit)

As we’ve seen, it’s usually much more important to focus your efforts on making
money as soon as possible than on borrowing startup capital. In different ways,
many of our case studies focused on three key principles that helped them
become profitable (either profitable in the first place or more profitable as the
business grew). I’ve noticed that the same thing holds true in my businesses. The
more I focus on these things, the better off I am. In short, they are as follows:

1. Price your product or service in relation to the benefit it provides, not the
cost of producing it.

2. Offer customers a limited range of prices.
3. Get paid more than once for the same thing.

We’ll look at each of them below.

Principle 1: Base Prices on Benefits, Not Costs
In Chapter 2, we looked at benefits versus features. Remember that a feature is
descriptive (“These clothes fit well and look nice”) and a benefit is the value
someone receives from the item in question (“These clothes make you feel
healthy and attractive”). We tend to default to talking about features, but since
most purchases are emotional decisions, it’s much more persuasive to talk about
benefits.

Just as you should usually place more emphasis on the benefits of your
offering than on the features, you should think about basing the price of your
offer on the benefit—not the actual cost or the amount of time it takes to create,
manufacture, or fulfill what you are selling. In fact, the wrong way to decide on
pricing is to think about how much time it took to make it or how much your
time is “worth.” How much your time is worth is a completely subjective matter.
Bill Clinton makes as much as $200,000 for a single one-hour speech. You might
not want to pay Clinton (or any president) $200,000 to speak at your next family
pizza night, but for whatever reason, some companies are willing to invest that