Why We No Longer Work with New Businesses

For unquenchable learners, there is a feature of our business that (I think) trumps all its other cool benefits: our business model is one giant feedback loop. We constantly research and learn new frameworks and methodologies, apply them to our business, then tweak, improve, and integrate them into the Ellevated Outcomes client process. And then, the cycle begins again. We don’t ask clients to do work we haven’t already trialed and tweaked ourselves. Our How to Price course is absolutely no exception. And actually, this is how we discovered: we shouldn’t work with new businesses…

Backing up a touch, I began learning about How to Price 13 years ago… with actuaries! Not sexy, but oh-so-helpful to my career. Talk about a nerd alert that’s paid compound interest to my business. Anyway, this is also where I was first exposed to this universal business rule:

Your bottom 25% of clients, products, or services cost you 150% profitability. Translation: your smallest clients, product or service group will lose you money.

And we’re no exception!

For the past 3 years, we’ve continuously worked on narrowing our services and honing our pricing. And I want to back up and give some extra color: my statement about the “bottom 25%” sounds harsh. Mean even. But please know that’s not my tone. I believe with all my heart and head that when you’re clear about what you do and who you do it for (and not), it’s good for everyone. It’s difficult to get that clear and confident, and yet: it’s one of the most generous business moves you can make.

So last year, following our own advice (taste of my own medicine much?) we raised our minimums and eliminated one of our products, thus completely eliminating new businesses as a target client profile. I want to give you a peek behind the curtain to understand why. That way, you can have a think about which product or service in your own business may be holding you back, financially and energetically.

Our new business program was much less profitable than our signature program Achieving New Outcomes. new businesses

We offered it at a lower price because it was for new businesses, who simply have less money. It was the right price for the market to bear, yet it wasn’t the right price for our business model. And our “cost of goods sold” (aka time spent with these clients) certainly wasn’t less, so by the numbers, our profit was less.

The competitive coaching and courses market is saturated for new businesses.

There are plenty of business coaches and programs aimed at helping new businesses get off the ground. It’s a fairly saturated market, which is great news for those who need it! Our differentiation speaks to a different target market that is far less saturated. So it’s silly for us to compete in a crowded market, full of competition.

We learned the critical characteristic of our ideal clients: they’re in some pain. new businesses

Here’s a deep nuance that we’ve discovered over the past few years: new businesses aren’t in as much “pain,” nor have they proven that their thing will sell. Businesses need ~2 years to test, learn, and refine: doing some journey-ing of their own, to discover exactly what sells. And along this journey will be highs and lows. A business owner needs to go through some lows first so that they can perceive our value because…

Value is in the eye of the beholder (aka client).

This lesson was the hardest and most painful for me to learn: it’s impossible for new business owners to understand the value of our work. That may sound provocative or snobby, but please know I don’t mean it that way.

As I always say: value is in the eye of the beholder. When a client hasn’t taken (at least 2 years) to go through their own trials and errors, they have no idea how much time we’re saving them and money we’re making them by doing it more effectively the first time. Let alone the compound “interest” our work pays by teaching them how to think about their business.

This came to a head for me earlier this year, after a negative client feedback session. This new business owner was angry that we taught them how to price and build their own approach to it, accentuating their own unique business, instead of handing them a competitor’s template. They didn’t have the experience and failures to understand that the model and skills we built with them was to make $100,000 more per year than the path they were headed down, on their own.

And I can’t underscore enough: I don’t say this in a defending or accusatory way. I’m actually a little bummed for them, is the truth. There hadn’t been the space nor time to try some things on their own first. They didn’t know what they didn’t know. They couldn’t see the facts: they got an immediate 700% ROI.

It was the ultimate lesson for me in target clients, products, pricing, and… you guessed it: Your bottom 25% in revenue costs you 150% in profit.

If you’re curious about how to do this for your own business, we’ll be offering our next enrollment of How to Price in September (back to school, anyone?). Make sure you’re on the list to learn more!