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About the time you get this issue of PHC News, I’ll be on stage, delivering a TEDx Talk. If you aren’t familiar with TED or TEDx, you may want to visit www.ted.com and discover inspiring and educational presentations on all kinds of subjects.
My TEDx talk is called, “How Much Should I Charge?” This question changed everything for me. I will have eight minutes to “unpack” this question. Here’s a copy of my speech, more or less. Perhaps you can relate to my adventures asking, and answering, the question:
“How much should I charge?”
We spent summers on the Jersey Shore when I was a kid, in Ocean City. About a block from our house was a mom and pop shop called Lazaleri’s. The Lazaleri’s had a deli and sold a few groceries. They also sold penny candy, back in the day. Once when I was six years old, I bought a bag full of candy and took it back to our house. My mom helped me set up a card table in the front yard. I bought the candy for one penny apiece. I sold that penny candy for two pennies.
How much to charge? I just made it up.
And that’s when I figured it out how business works. You buy something or you make something, and you sell it for more than it costs. And you create your own money. How incredibly liberating is that? You decide how much you are going to charge. You figure out much things are going to cost and then just pick any number more than that. And I learned this by selling penny candy for two pennies.
And then later on, I forgot it.
I grew up. I went to a university, and graduated at the top of my class with a degree in Business Administration, at a prestigious private school. They taught me a lot about business, but not about making money. I got a real job, a management position, and started to move up the ladder. I was making good money, with benefits and prestige.
Then I quit that real job and went to work for my husband, Hotrod the plumber, when his partner died. His partner and best friend since they were eight years old, Dick Yox, had stressed out, worked himself into a health crisis, and died at age 33. On a Sunday after working a 100-hour work week.
So, thinking I knew something, I jumped into the family business. However, I’d forgotten what I’d learned in the penny candy business: Charge more than it cost.
What I did do was slip into a couple of myths that I learned while I was at university. You have to charge “what the market will bear.” That there is this thing called the “going rate.”
So I called my competitors and asked, “How much do you charge for a water heater?” and charged what they charged. Only a little bit less. You know, to get the job.
And I proceed to sink me and my husband and our company into this big abyss of debt. We were hating each other. I would cry, “We don’t have enough money!” and Hotrod would hear, “I’m not working hard enough.” Our employees were frustrated. My health and relationships were going down the drain.
This business thing is tough, or you can make it tough. I sure did. Hotrod’s friend Yox sure did.
And then, in the pages of a plumbing magazine, I met another plumber named Frank Blau. He wrote an article on pricing. He reminded me that you have to charge more than it cost.
I crunched the numbers and got real with how much my business was costing. I realized I needed to raise our prices. A lot. And I was scared. But accounting taught me that if I charge less than it costs, I’ll go into debt, or end up cash flowing the business with our family savings.
Have you been there? So many business owner friends, clients and colleagues, just don’t know their asset from their elbow. And, because they don’t know, they wing it every day, they check their bank balance and rock and roll. But the checking account doesn’t show the debt. That’s on the balance sheet, and they never look at that. Or, it’s just a mess of numbers and doesn’t make any sense. Because they don’t know where the money goes, they sometimes take it out on their team. They get accusatory, and trust dissolves. I’ve been there. It was only the PAIN of my poverty that got me to finally sigh and say, “Okay, I will figure this out. I will figure out the money.”
We quintupled our prices. Gulp.
I also figured out that if you are going to charge more, you have to BE better. So, we bought new shirts. This was a “value add” because prior to this, one of our techs wore a shirt to work that said, “Kill them all, and let God sort them out.”
Right away, we made more money. We got out of debt and stockpiled assets. It’s not that complicated. And, it’s only as hard as we make it.
My hope, my intention, is to encourage you to lay claim to your financial power. To consider your business as a way to make money and an impact.
I believe honorable, profitable business is no small thing. You and I, we have to exchange goods and services with one another. Because no one has everything they need to survive.
There are only a few ways to do this. Government. I believe that government has a role, to provide common services with tax dollars. To aid in time of need. War is another way. You have something we need or want and we could lob bombs and take it from you. Crime works. If there were only a black market available, I would participate in it. How about you? Charity plays an important role.
Government, war, crime, charity … I concede that there may be a place for all of these ways to distribute goods and services. However, they do or can collapse freedom.
However, when you and I trade freely with each other, it is liberating. Money buys options.
If you want to impact the world, make things better, money helps. Learning how to make money is perhaps the most powerful thing we can do to expand peace, prosperity and freedom. Your options expand, and the ripples from honorable, profitable business can resonate that freedom across that planet. Our businesses are no small thing.
What an honor and privilege to be on the TEDx. I’m grateful for my education, too. However, what I learned about making money, I didn’t learn in school. I learned it selling candy. I learned it from plumbers.
How much should you charge? More than it costs.
I’m excited to add my thoughts and encouragement to the TEDx library. I’ll share the link once my presentation recording makes it to the main site. I hope you’ll explore www.ted.com Here are a couple of a few of my favorite talks:
Ellen Rohr provides “in the trenches” insight that business owners can relate to. Comments? Questions? A different view? Reach her at 417-753-1111 or email@example.com. You can also join the Bare Bones Biz community, at www.ellenrohr.com, for free tips, problem-solving webinars, money-making tools and lots of love.