Math Kills Fear

What if the very thing that sets you apart is the key to everything you're striving for? Welcome to Uncommon Edge, the podcast for those who are done with the ordinary and ready to own what makes them different. I'm DJ Newman, and if you're here, it's because you know you're built for more. You're uncommon by design, ready to break boundaries and build a life of purpose, success and impact. Each week, we'll dive into hard hitting strategies, raw stories from the trenches, and the tools that will sharpen your edge. From game changing lessons to deep diving interviews, this is your space to rise up, build, and make your mark. Whether you're growing a business, dreaming of starting one, or looking to level up in life, you'll leave each episode with insights and inspiration to make it happen. You weren't designed to blend in. You were designed to stand out. So if you're ready to defy the norm and bring out your best, let's dive in. Get to work. Your journey to owning your Uncommon Edge starts now. If you set your prices back when you were inexperienced and you've never really raised them, I want you to hear this super clearly. You are not running a discount. You are accidentally running a nonprofit. Every year your costs went up and your prices didn't. You took the pay cut so your customers wouldn't have to. Today, I'm giving you the entire playbook for fixing exactly that. The math, the letters, and exactly how to run it. And I'm telling you up front, the math is what kills the fear. Welcome to the uncommon Edge. I'm D.J. Newman. A couple episodes back, I told you about the first lever I pull with every business owner, the expense audit. Find the money that's already sitting in the business and walking out the door. That's what I call a money mission. And the expense audit is mission number one that I run with all my clients because it's the fastest and it's certain it works exceptionally well with established businesses. Especially if you haven't been watching your money for a while. Newer businesses, startups, it can happen for you, too. It might not be as big of an impact, but that just means you don't have to suffer the loss that the established companies that haven't been watching their money is doing. But today is going into money mission number two, and this is the one where the ceiling comes off. Because pricing is the highest leverage move in any business. A price increase drops almost entirely to the bottom line. No new leads necessary, no new headcount, no new marketing. Spend all of it goes right to the bottom line if done properly. If you know your numbers, if you know what it costs to deliver your product or service and understand what that means. Now, I'm not telling you, just go and just, you know, raise your prices all willy nilly. The market will tell you what they will and will not afford. And I promise you, what's in between your ears typically isn't the same as what reality is in the past or that you've done. People will vote with their wallets and price is all made up anyway and it's just a reflection of the value that you're bringing to the table. Not to mention what you're going to be able to provide the clients and people if they have an opportunity to, you know, earn more, do more, be more, or you're solving some problem that's worth something to them, they're going to be willing to pay for it. And you know what? If you're the best at what you do, shame on you for not going out there and getting that client because you know that you're going to be able to provide a better service for them than anybody else. But I do want to say one thing just so that you can like see the leak before you get the fix. Here's how it happens. I want you to see yourself in what I'm about to say. You set your prices when you were new. Maybe you were scared. Maybe you had no idea what you were doing. Maybe you just copied the guy down the road. Or you know, he maybe was just guessing as well and didn't know what he was doing. But you went ahead and you just did that. You copied it. You did your thing. Maybe you didn't know to price your pricing based off your real numbers, or maybe you didn't even know your numbers. But then along the way, you got better, you got faster, you got more experience, you put in the reps, your quality went up, your insurance probably went up too. Materials went up, labor went way up, especially post Covid fuel went up. And your prices, chances are exactly where they were, the same as where they were. I've been guilty of this for years before I got this recipe and I put a spin on it and I want you to have it. So let me just reframe what's actually happening here. You didn't give your customers a discount. A discount is a decision. What you did was quietly observe every cost increase in your industry so that your customer wouldn't have to feel it. Because you, you, you, you're trying to be the nice guy or the nice girl? Because you know deep down inside, you know you don't want a price increase, so why should you pass it along? And you don't realize that you're the one that's bleeding this whole thing, so you took the pay cut on their behalf every single year. And here's the line I want you to sit with, because it's the whole reason this episode exists. The client who built their budget around your underpricing were never paying you. You were paying them. Now, I know exactly what's happening in your head right now, because I hear it from every owner I sit down with. And it's always the same. It always sounds the same, every excuse. If I raise my prices, I'm going to lose half of my clients. Okay, let's actually run that, because the fear never survives the arithmetic. Let's say you raise your prices 40%. That's a big, scary number. Every client who stays is now paying you one times what they were paying you before. So here's the question. How many clients can you lose before you're back to the same revenue that you have today? Go ahead, take a guess. 29%. Almost a third of your clients can walk out that door. And your gross revenue is exactly where it is right now. Same money. Yeah, fewer clients, but guess what? Less work. Let me give you the formula so you can run it on your own numbers. Break even, client loss equals one minus one divided by your price multiplier. So what that means is, let's say you want to raise your price 40%. What you would do is you would take number one minus one divided by 1.4, which is roughly 28.6%. Round up to 20, 29%. Okay. So that tells you how many clients you can actually lose and break even with what you're currently at. So if, let's say you wanted to do that at a 20% price increase, then you would just do the same thing. One minus one divided by 1.2. And that would give you roughly 17% customer loss, which. Which means that your revenue is half of your clients that are actually left is 60% of your current. And here's the rest of the table. So just pick the number that fits you. You know, you can do 20, 30, 40, 50%. Whatever. I have a whole thing that I'll be able to give you. But now let's go into your nightmare scenario. Let's say you're right and half your clients actually leave at 40% increase. You keep 70% of your revenue. That you're doing half the work on. So think about that. What does that actually do to your margin in a service business? Half the labor, half the fuel, half the wear on your equipment, half the headaches, and you still keep 70% of the money. Wait, are the gears clicking? I want to be honest with you about one thing though. Nobody can promise you an exact attrition number. Not me, not anybody. You know, I don't care if it's the best mathematician. You know, there's all kinds of factors that go into this. What the math does prove, however, is the downside has a floor, and that floor is survivable. That's what lets you actually decide to pull the trigger and actually, you know, jump. And so like, while you're like fired up about all this, look, I, I want you doing the math out loud. And you know, and when we're doing it out loud on a podcast, it's a lot to follow. I get it. So I put the whole thing in writing for you. The break even table. We're going to be talking about like the, the letter templates, the full implementation guide of raising your prices. Just text the word pricing to the number 218-GET EDGE. That's 218-433-83343. Just text the word pricing. I'll send it over to you. No cost, no hoops, no nothing like that. Now here's the thing that almost nobody expects and it's held up over and over in real business. Your loyal, long tenured clients, like the people who've been with you for a while, are least likely to leave over price. The ones who actually have been with you for years, the ones who know your work, who trust you, they didn't hire you because you were cheap. They stay because they enjoy the relationship, they enjoy your track record. And you know, it's not all about money with them. So who does leave when you do a price increase? It's typically the price shoppers, you know, the ones who may have found you on price when you were discounting and don't have any loyalty to you whatsoever. And here's the beautiful part. Those are the exact same clients that are consuming typically most of your time per dollar. They call the most, they complain the most, they pay the slowest. If I could go back in time and tell myself, hey, like the cheap ones, the ones that are paying you the least are typically the ones you don't want to work with. That was a lesson that took me all too long to understand. In reality, there's actually some Math out there that says, like, realistically, the majority of your business comes from your top 20 clients. 20, 20% clients. Which is crazy. So when you. When you raise the price, and let's say you do lose, half your best clients are the ones who are staying with you anyway. So in the worst case, the price increase does something you've been meaning to do for years and never had the stomach to do it. And that's fire your worst clients. It will fire your worst clients for you without you having to have a single uncomfortable conversation. How cool is that? All right, so you've run the math. You're gonna do it now. You have to tell them. You got to tell your customers. If you just do a price increase and don't say anything, especially if it's a large price increase, that ends up having a weird conversation. I've done that before where I've raised my prices and I've had some of my good clients say, hey, dj, what the heck? I'm gonna pay it, but what the heck? You could have given me a warning first. So let me teach you a lesson that I had to learn the hard way so you don't have to. All right, so here's the framework. It's five parts. If you learn these five parts, you can write this letter for any business on earth. And this is the price raise letter. Part one, you have to thank them and remind them of the value. Look, it doesn't have to be anything crazy. Two or three sentences. Thank them for being a customer. Remind them what you've actually delivered over time, you know, that you've worked together or the product that you delivered. Be specific where you can. It's not flattery. It's just setting the frame. This is the relationship, you know, you're just stating that the relationship has been worth something. That's the main thing. So part two, and this is the engine of the whole thing, restate your promise. As business owners, we all make promises. That's part of marketing. You go out there, you make the promise, and then you convince them that you can deliver the promise. And then you actually have to deliver the promise. So at this point, chances are you've delivered the promise. Hopefully you did it well. If you're listening to the show, you should darn well be doing it well. When they hired you, you know, you obviously promised the standard. You showed up on time. You did it right. You made it right. You know, you're the best at what you do. Keeping those promises means continuing to invest in the business. Right? And when you write this exact sentence, because of that, prices have gone up. I'm going to say it again. Because of that, prices have gone up. So you just explain exactly what it is. And because of that, prices have gone up. Notice the wording prices have gone up. Not I'm raising prices. It states a reality instead of announcing a decision. It also hands you the moral high ground. Realistically, anyone arguing against increasing is effectively arguing that you should break your promise to them. Cut corners, deliver inferior service. That's not fair to them and it's not fair to your other customers. So I want you to really understand that psychological aspect. Part 3. This is the loyalty bridge. Basically, as a thank you for their loyalty, you automatically apply a discount that holds their current rate for the next three to six months before the new pricing takes effect. The key word automatically. They do not have to ask, qualify, or negotiate. This single paragraph does most of the heavy lifting for you. To protect the relationship, it converts the price hike into a gift of time, if you really think about it. Then we go into part four, where the money goes. Name two or three specific investments that the new pricing will fund. Maybe it's better equipment, more training, faster response times, added staff, upgraded systems, whatever is true for your business. This proves that the increase buys something rather than just padding your pocket. And then five, you want to close with thanks. And then the PS safety valve, which I'm going to explain here in a second. So just thank them again. And you know, you want to just increase like that level of trust as you're, as you're doing this, how the, how it's going to genuinely affect your business and how much it means to you that they've been a loyal customer to you and you're appreciative of the fact that they're understanding and all that type of stuff. But this is where it gets, you know, interesting with the psych. There's a business to customer version and there's also a B2B. So like you just put PS. If this increase would genuinely affect your ability to cover essentials like groceries or your mortgage, please reach out and we'll figure something out. If it's a B2B, you could say, if this change would materially like damage your business, please reach out to me directly. I'm confident we can figure something out. The PS is your basically guilty racer. You're not pricing any money out. You're only truly in a bind and they have a direct line to you if they're truly in a bind. So it's just A really, really nice way to, to do this. It's a nest, a necessity and you know, it has to, it has to work. So. Four things that will blow this up though. I've, I've watched every one of these happen. So I want you to, to understand when you're writing this out. One, I don't want you to apologize anywhere in that letter. An apology will single handedly signal to everybody that the price is negotiable. Huge. 1. And everybody makes that mistake. I've made that mistake. You've probably made the mistake. If you've been in business for a little while, don't apologize. Two, do not lead with inflation or the economy or Covid or anything along those lines because that's everybody's excuse and it's weak. The promise framing is way stronger and it's yours. So costs can be a supporting fact, but never the headline. Three, do not stagger this client by client or over a few months you'll create a rate change chaos. It's hard for your team to keep up on and I promise you, your clients talk to each other. So if you do that, it's going to mess with you. 4. Do not raise prices and change nothing. I'm going to say it again. Do not raise prices and then change nothing. Part four of that letter is a commitment. And deliver what you've actually named. Why the increase gets the extra thing or the whatever it is so they feel like they've gotten something of, of value. Otherwise they start thinking in their head, why couldn't I keep the rate right? So here's your challenge and it's, it's just arithmetic. You don't have to do anything scary this week unless you want to be brave. Take your price, pick the increase that you've been afraid of and run the formula that we talked about, one minus one divided by the multiplier and find out exactly how many clients you could lose before it even costs you a single dollar. That's it, just get the number. Because I have never once watched an owner run that math and come away more afraid than when they started. And one more time on the playbook that we talked about because this kind of thing you want sitting in front of you when you actually, you know, go to do it. Just go ahead and text pricing the word pricing to 218-GET-GE. That's 218-438-3343. I'll send the whole thing, the math table, the four different letter examples for you know, service, retail, manufacturing. I've already done all the heavy lifting for you. You'll also get a two week implementation checklist and exactly what to say when somebody pushes back. Same book. It's the same playbook that I use with clients and it costs you absolutely nothing. Next week we're staying on the same kind of money mission idea and we're going to be going after that one thing that quietly kills more businesses than anything else. I'll give you a little hint. Profit is theory, but cash is fact. Maybe you've heard me say revenues for vanity, profits for sanity. Cash flow is king. And I've watched profitable companies borrow money to make payroll. That is crazy to think about. We're gonna be talking about that next week. I'll leave you with this. The client who built their budget around your underpricing were never paying you. You were paying them. And you didn't do it because you were generous. You did it because nobody ever showed you the math. Now you've seen it. You have no more excuses. Charge what the promise costs to keep the playbooks at 218 Get Edge keyword pricing. Everything else is at Uncommon Edge podcast.com I'm DJ Newman. Stand out and stay sharp. You've been listening to the Uncommon Edge with DJ Newman, where average goes to die and your next level begins. If you're ready to go deeper with real strategies to build a stronger business and a stronger life, head over to uncommonventures.net new episodes every week. Now get out there and do something. Uncommon.