How to Raise Prices

Marie Forleo: Hey, it’s Marie Forleo, and you are watching MarieTV, the place to be to create a business and life you love. And this is Q&A Tuesday, except it’s not a normal Q&A Tuesday. This is very special because I am not answering the question on this Q&A Tuesday, is my very dear friend, who also happens to be a New York Times bestselling author of this amazing book called I Will Teach You To Be Rich, and my dear friend is Ramit Sethi. Ramit, thank you so much for being here.

Ramit Sethi: Thanks for having me.

Marie Forleo: Today’s question comes from Alexandra, and she writes, “I love watching your videos, and I find them very inspirational. I own a real estate virtual assistant company that’s fairly new. I recently watched your pricing video, and I’d love to hear more. I charge per hour for most jobs, 15 bucks an hour, and I have a hard time raising that price for a few reasons. Number one, realtors don’t want to pay too much for a VA. Number two, I’ve had the same price for the past year, and raising it now might be tough. The agents I currently work with already understand how valuable a VA can be. My question is, do I raise my prices and risk losing clients, or grandfather the old clients in and raise the prices for the newer clients?

Marie Forleo: “As an entrepreneur, I’m working 7:00 AM to 2:00 AM on most days to keep up with the work while building the business, and I don’t have the funds to show for it. I’m at a crossroads where I think I might have to decide, as you mentioned in the video, fewer clients but higher income, or a lot of clients and lower income. Any advice on this kind of situation. Thank you so much.” So Ramit, what do you got to say about that?

Ramit Sethi: I think it’s a classic problem that entrepreneurs have where we believe if we raise prices, everyone will just desert us. And that’s just not the case. What we’re doing is we’re making a lot of assumptions when we think that. We think that we’re going to walk into our clients, throw a piece of paper at them, and say, “I’m tripling my prices. Pay me or leave.” And that’s not the way you raise your prices, right?

Marie Forleo: Right.

Ramit Sethi: And also, pricing is strategic. If you’re charging $15 an hour, and you’re working seven days a week, and your business is not where it is, there’s something wrong. And I can tell you that your pricing is probably very, very low because you can hire a high school student for $15 an hour.

Marie Forleo: Right.

Ramit Sethi: If you know the realtor market, you should be able to charge more if you can properly convey your value.

Marie Forleo: Okay. Well, this is huge. And I think you just hit the nail on the head about properly conveying one’s value, and this is where I think Alexandra is really struggling. So it’s a mindset belief, but also she doesn’t have the tactics or the strategy to move ahead.

Ramit Sethi: Right. Imagine, let’s put ourselves in the mind of a new mother. Let’s go on a quick little journey.

Marie Forleo: Yeah.

Ramit Sethi: So you’re a brand new mother, and you have this beautiful two-day-old son, and you want to take some portraits with you and your new son. So who do you want to hire? Do you want to hire John Jones who charges $200 flat, and he takes pictures of babies, horses, and tables.

Marie Forleo: Right.

Ramit Sethi: Or do you want to hire Mr. Richard Millington, who only takes photos of newborn babies between the ages of one day and one week, he charges $1,000, but he has a beautiful portfolio, and he can capture that moment for the rest of your life? And by the way, he charges $1,500.

Marie Forleo: Oh my God. So of course, number two, because you want the person who’s specialized.

Ramit Sethi: Price, at that point, when he’s conveyed his value, is a triviality. Now am I saying everyone can afford $1,500? No. But for that subset of clients, they can. And because Richard Millington, his portfolio, is so strong, and he specializes in it, he doesn’t take pictures of llamas and buildings, he takes pictures of babies, and he knows exactly what to do to convey that. He knows, for example, that mothers are really tired, so he’s going to go to them.

Marie Forleo: Right.

Ramit Sethi: He knows everything about what that client wants. He can charge that. And the best part is the clients will happily pay. And that’s the entire difference of being a commodity and just saying, for example, “I’m a VA,” which is problem number one. No one’s ever going to pay you that much more if you just call yourself a VA.

Marie Forleo: Right.

Ramit Sethi: Versus being a real estate professional assistant or something like that, which gets exactly at the heart of what these realtors want.

Marie Forleo: Right. I love that. And even just the languaging versus a VA and real estate professional assistant, or professional real estate assistant, completely different positioning, and it’s just a matter of a few words.

Ramit Sethi: It is. So she had a very specific question of how would I raise my rates?

Marie Forleo: Right.

Ramit Sethi: So let’s talk about some scripts that I might use, and I teach this to my Earn1K students, who want to know how to earn money on the side using freelancing. And I sort of scripted out for them word for word because there’s a very clear way of raising your rates, where people actually respond very well to it. By the way, I’ve had this happen, people who actually raised their rates on me using my own script. And I was like, “Okay, well, you did it right. What can I do? Here you go. Here’s the check.”

Marie Forleo: Did you actually feel that way?

Ramit Sethi: Yes.

Marie Forleo: Yeah.

Ramit Sethi: And here’s the thing. If they were, I didn’t feel cheated. I wrote the script, and I still didn’t feel cheated because they were actually delivering me massive value, and I was happy to pay it, and I didn’t want to lose them.

Marie Forleo: That’s awesome.

Ramit Sethi: So that’s the whole point of a win-win with your client, is if you’re offering massive value and you show them how you’re going to do that in the future, it’s not adversarial. It’s actually like, okay, I understand. I understand that. Let’s just continue doing business. So here’s what I might say. First of all, I might send out a little survey to my clients saying, “How can I improve my work with you? What is it that you’re looking for this year? If budget was no concern, if you could have me help you do anything, what would it be?” So that already is massively valuable insights so you can learn what they want. Then you can go, and you can prepare a letter or an email, and you can say, “Hi, Josh,” the client, “I wanted to just talk to you about a couple things in terms of our engagement together.

Ramit Sethi: “First of all, in the last year, this is what we’ve done together. I’ve helped you manage your e-mail inbox, saving you over six hours a day. I’ve helped you refer you 19 clients, generating a total of $450,000 and X dollars in commissions. And I’ve helped you do X, Y, and Z. This year, one of the things you told me was you’re looking for A, B, C. Now I’m going to be adding, A, as a complimentary part of my services to you. That’s because I’ve heard from a number of clients that you want that, and so I’ll be able to do that for one hour a week for you as a complementary part of us working together.

Ramit Sethi: The other thing is I’m becoming more selective in the clients I work with. Now you and I have had a great time working together. We’ve generated $450,000 in revenue, and I’ve helped save countless hours. My rate is going to be going from $15 an hour to $25 an hour. If that’s something that you’re not comfortable with, please let me know. I’ll be happy to refer you to someone else who might be better fit for your cost needs. But if this is something that works for you, these are my plans for the next 30, 60, and 90 days, and I would look forward to working with you together.”

Marie Forleo: Oh, that was so good. I wanted to hire you or hire whoever you were talking about, it was that good.

Ramit Sethi: Yeah. The beauty of it is you’re not cheating anybody and you’re not making them feel bad.

Marie Forleo: Right.

Ramit Sethi: You’re talking about what you’ve done, where you’re going, and what you can do for them.

Marie Forleo: You know what I love about this is it forces the entrepreneur to deliver more value, and articulate what they’re doing, and also think ahead. So it actually, what you’re describing forces every entrepreneur to become a better entrepreneur, and that I absolutely love.

Ramit Sethi: Yeah. Why should you get paid more if you’re not doing anything more, just because you’ve been around for a year? I don’t care. I don’t care as the client. Tell me how you’re going to make my life better, make me more money, save me more time. That gets a raise. So if this forces you to be a better entrepreneur, I’m all for it.

Marie Forleo: That’s awesome. Great, great. This answer is fantastic. And I also know, for everybody watching, you’re all are going to be like, I want the script. Listen again, write it down yourself. That’s the way you’re actually going to learn it. Am I right?

Ramit Sethi: That’s right.

Marie Forleo: Yeah. That’s awesome. So what we like to do always on MarieTV is challenge our viewers. Because you know, you watch MarieTV. As a side note, Ramit, he thinks MarieTV is kind of crazy, and he’s told me that, right?

Ramit Sethi: Well, I don’t dance for my readers, okay? So let’s start with that.

Marie Forleo: Why not? Everybody who wants to see Ramit dance for their readers, you can leave a comment below, and let us know that. I know you maybe won’t do it, but we’ll see that.

Ramit Sethi: Yeah.

Marie Forleo: Anyway, we like to challenge our viewers. We love to challenge you to actually take what we talk about and put it into action. So I think it’s a great challenge today. Let’s talk about, have you ever been afraid to raise your prices, or have you raised your prices, and what happened? And of course, Ramit, you might want to add something to this. Do you have anything to add in terms of a challenge for our readers?

Ramit Sethi: Yeah. I’d love to challenge them. I would love to say, write out what you could say to your client to get them to raise it, even three or four sentences. What could you say that would deliver massive value and make them happy to pay you more?

Marie Forleo: Oh, let’s do that one. Let’s do that one. So if you want to talk about what you’ve done in the past, that’s great, but I really love Ramit’s challenge about adding three or four sentences of the value that you can add to your client’s life that will help you raise your rates and have them say, yes.

Ramit Sethi: Let’s do it. I’m looking forward to it.

Marie Forleo: Awesome. Ramit, thank you so much for being on MarieTV. This was awesome. You delivered so much value, and I love having you here.

Ramit Sethi: Thanks for having me.

Marie Forleo: Remember, all of the action happens after the episode at marieforleo.com, so go there and leave a comment now. Did you like this video? Then like it, and subscribe, and, of course, share it with your friends. And if you want even more great resources to have a business and a life that you love, get your butt over to marieforleo.com, and make sure you sign up for e-mail updates. Because I tell you things in e-mail that I just don’t say in videos, and I know you want to hear it. So thank you so much for watching MarieTV, and I’ll see you next time. Hey, RHH Live is coming up. Are you coming? Go to rhhlive.com for details.

Ramit Sethi: I just showed up today. I just woke up.

Marie Forleo: He just woke up.

Ramit Sethi: We can’t do this again because Ramit will literally not be my friend anymore. Actually he’ll still be my friend, he just won’t come back to the show.

Marie Forleo: E-mail friend, e-mail friend.

Ramit Sethi: (beep) you.