One of the most frequent questions investors looking to ‘Package’ or ‘Sell on’ deals is what price to charge for their services.
If you’re like many investors, setting the price of your deals is the psychological equivalent of setting the value of YOU. Your life, work, the things you’ve put your life, sweat and soul into.
What’s t h a t worth?
Good question.
You reach a decision and start selling your deals. All go, until a potential buyer sows seeds of doubt by saying: “That’s expensive!”
Or…
“Can I just pay you on completion?”
When we first started selling deals in 2005 we set our minimum deal sourcing fee at £3K. It was our first year in the property business and some people told us we were too expensive.
That shocked me. But because of my parallel world as a life coach/personal development junkie, I knew that some weird mindset stuff was going on in the mind of the people saying we were expensive.
When someone says “that’s too expensive”, they’re acknowledging a comparison. A comparison they don’t often know they’re making. They’re measuring your price versus something else, another choice or option, and you don’t know what that ‘something else’ is.
Want to know how to stop this? When they say, “That’s expensive,” ask this:
“Compared to what?”
My friend Neil who runs a marketing agency told me that he asked a potential client this question, and the answer completely surprised him. I guess he expected a comparison to other companies or services, but his prospect paused for a while, almost in stunned silence, and then said “…piano lessons!”
So this person was looking into full marketing management and consultancy, something that makes companies 7, 8 or 9 figures a year, and the only mental reference for price comparison was piano lessons for their child! This was the comparison that left them feeling the rate for end to end marketing consultancy was ‘too expensive.’
But as Neil continued…
‘It doesn’t make sense to compare piano lessons to a team of professional marketers working on your business. They’re not the same, and there are no similarities that can be drawn.The unconscious comparisons people make regarding price are largely BS, and they rarely hold up to closer scrutiny.’
Our rates for a Handsfree property portfolio are now 3 times what we used to charge in 2005, and business has been great, with our best ever summer when other companies struggle or shut up shop for holidays.
Perceived value increases dramatically when you have higher rates (if your skills and experience justify them, of course). I’ve been telling this for years to the thousands of investors we’ve helped set up their property businesses, who sell themselves WAY too cheaply and as a result attract lower quality clients.
Neil jokes that if you want to help someone grow their business, just charge them 15,000 for the consultation. They’d take it so damn seriously that they couldn’t help but apply what you showed them!
This is just a joke, but it does demonstrate the important principal that clients paying more are almost always more responsive, proactive, rewarding to sell to, more grateful, and will spend more.
But most people start by pricing too low, doing too much work for not enough margin, for customers they don’t like working with. So…
Here’s a list of Neil’s most important questions you’ll ever ask yourself about pricing your deals and property services.
- What do your customers compare your price to?
- What are you comparing your price to?
- What would you like your customers to compare your price to? (They’ll always compare it to something!)
It’s well worth 15 minutes to work out your answers to these questions, really makes you feel positive about possibilities, right?
Mark Homer