The famous Venture Capitalist Marc Andreessen was on Tim Ferriss’ podcast recently. He was asked what he would put on a billboard for millions to see, and this was his response: “raise prices”.
He says that many small businesses get in the trap of charging too little to garner market share, but then they have no money for sales, marketing and hiring. So they cannot grow or improve. He constantly has to force startups to raise their prices.
Small businesses often undervalue their services and product.
The other problem with competing with price is that you attract customers who focus only on price and often do not appreciate excellent service. In addition, those customers often refer their like-minded friends. So businesses get in the trap of always having to compete on price to please their clientele.
We see this often in the mortgage industry and real estate industry. The trap of cutting commissions can be deadly, especially when clients often do not understand how much work goes into every transaction, and how much overhead we all have to cover.
Raising prices (or at least not cutting commissions) was one of the best pieces of coaching advice we ever received.
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