Your Pricing is WRONG (even Sam Altman Made This Mistake)

even Sam Alman got it wrong the CEO of even Sam Alman got it wrong the CEO of open AI valued at $80 billion just open AI valued at $80 billion just open AI valued at $80 billion just admitted they're losing money on their admitted they're losing money on their admitted they're losing money on their $200 a month chat GPT Pro Plan if one of $200 a month chat GPT Pro Plan if one of $200 a month chat GPT Pro Plan if one of the most sophisticated tech companies in the most sophisticated tech companies in the most sophisticated tech companies in the world can underprice their product the world can underprice their product the world can underprice their product chances are you can too and it's chances are you can too and it's chances are you can too and it's probably costing you more than you think probably costing you more than you think probably costing you more than you think in the next 9 minutes I'll show you how in the next 9 minutes I'll show you how in the next 9 minutes I'll show you how charging too little is the silent killer charging too little is the silent killer charging too little is the silent killer of great businesses and how you can fix of great businesses and how you can fix of great businesses and how you can fix it if you're not charging enough and if it if you're not charging enough and if it if you're not charging enough and if you get your pricing right you can you get your pricing right you can you get your pricing right you can actually have an unfair advantage over actually have an unfair advantage over actually have an unfair advantage over your competition hey Rob Walling here your competition hey Rob Walling here your competition hey Rob Walling here I've been talking for years about how I've been talking for years about how I've been talking for years about how pricing is the biggest lever in SAS and pricing is the biggest lever in SAS and pricing is the biggest lever in SAS and during several of our early microc comps during several of our early microc comps during several of our early microc comps this is 13 14 years ago Patrick McKenzie this is 13 14 years ago Patrick McKenzie this is 13 14 years ago Patrick McKenzie who you may know as patio 11 got on who you may know as patio 11 got on who you may know as patio 11 got on stage looked at a room of Founders and stage looked at a room of Founders and stage looked at a room of Founders and said two words that at one point became said two words that at one point became said two words that at one point became his calling card charge more we started his calling card charge more we started his calling card charge more we started talking about this back in 2011 and talking about this back in 2011 and talking about this back in 2011 and today 14 years later the advice is still today 14 years later the advice is still today 14 years later the advice is still valid even at the highest levels of tech valid even at the highest levels of tech valid even at the highest levels of tech as we see with AI in a minute I'll get as we see with AI in a minute I'll get as we see with AI in a minute I'll get to why charge more is great advice but to why charge more is great advice but to why charge more is great advice but first let's talk about a few of the first let's talk about a few of the first let's talk about a few of the reasons Founders undercharge to begin reasons Founders undercharge to begin reasons Founders undercharge to begin with you might title this section the with you might title this section the with you might title this section the psychology of undercharging it's easy to psychology of undercharging it's easy to psychology of undercharging it's easy to understand why Founders fall into this understand why Founders fall into this understand why Founders fall into this trap I've seen four core fears keep trap I've seen four core fears keep trap I've seen four core fears keep Founders from charging what the product Founders from charging what the product Founders from charging what the product is worth the first is that nobody will is worth the first is that nobody will is worth the first is that nobody will buy my product if I charge more and in buy my product if I charge more and in buy my product if I charge more and in reality usually we're undercharging and reality usually we're undercharging and reality usually we're undercharging and that you can have an equivalent or a that you can have an equivalent or a that you can have an equivalent or a competitor that is often charging much competitor that is often charging much competitor that is often charging much more but you still don't have the more but you still don't have the more but you still don't have the confidence to increase your prices fear

confidence to increase your prices fear confidence to increase your prices fear number two is my product isn't good number two is my product isn't good number two is my product isn't good enough and in fact usually it is usually enough and in fact usually it is usually enough and in fact usually it is usually this is something in the back of your this is something in the back of your this is something in the back of your mind it's something like impostor mind it's something like impostor mind it's something like impostor syndrome where you say I'm not good syndrome where you say I'm not good syndrome where you say I'm not good enough when is everyone going to figure enough when is everyone going to figure enough when is everyone going to figure out that I don't actually know what I'm out that I don't actually know what I'm out that I don't actually know what I'm doing and I'm an impostor I might almost doing and I'm an impostor I might almost doing and I'm an impostor I might almost call this product impostor syndrome call this product impostor syndrome call this product impostor syndrome where you say when is everyone going to where you say when is everyone going to where you say when is everyone going to figure out my product isn't good enough figure out my product isn't good enough figure out my product isn't good enough when in reality in almost all cases it when in reality in almost all cases it when in reality in almost all cases it is and across the 22 12 B2B SAS is and across the 22 12 B2B SAS is and across the 22 12 B2B SAS Investments that I've made the vast Investments that I've made the vast Investments that I've made the vast majority of them at one point were majority of them at one point were majority of them at one point were underpriced and the vast majority of underpriced and the vast majority of underpriced and the vast majority of them when they raised prices things went them when they raised prices things went them when they raised prices things went in the right direction things went up in the right direction things went up in the right direction things went up and to the right now you can raise your and to the right now you can raise your and to the right now you can raise your prices too much and I'll talk a little prices too much and I'll talk a little prices too much and I'll talk a little bit about that later but for the most bit about that later but for the most bit about that later but for the most part specially bootstrapped and mostly part specially bootstrapped and mostly part specially bootstrapped and mostly bootstrapped Founders that I see they're bootstrapped Founders that I see they're bootstrapped Founders that I see they're undercharging the third fear is my undercharging the third fear is my undercharging the third fear is my competitors charge less and competitors charge less and competitors charge less and realistically if you are a commodity and realistically if you are a commodity and realistically if you are a commodity and someone can swap out your product for or someone can swap out your product for or someone can swap out your product for or another one then it is hard to charge another one then it is hard to charge another one then it is hard to charge more if it's a one for one comparison a more if it's a one for one comparison a more if it's a one for one comparison a gallon of gas versus another gallon of gallon of gas versus another gallon of gallon of gas versus another gallon of gas or this Orange versus this orange gas or this Orange versus this orange gas or this Orange versus this orange and they are basically the same thing and they are basically the same thing and they are basically the same thing then why should you have pricing power then why should you have pricing power then why should you have pricing power why should you be able to charge more so why should you be able to charge more so why should you be able to charge more so the key with looking at competitors and the key with looking at competitors and the key with looking at competitors and saying well they charge less than I do saying well they charge less than I do saying well they charge less than I do is to have a product that's is to have a product that's is to have a product that's differentiated you either want features differentiated you either want features differentiated you either want features or positioning or a focus or a brand you or positioning or a focus or a brand you or positioning or a focus or a brand you want some type of moat that keeps you want some type of moat that keeps you want some type of moat that keeps you from being a commodity I actually talk a from being a commodity I actually talk a from being a commodity I actually talk a lot about this in the SAS Playbook about lot about this in the SAS Playbook about lot about this in the SAS Playbook about how not to be viewed as exactly the same

how not to be viewed as exactly the same how not to be viewed as exactly the same as other products on the market because as other products on the market because as other products on the market because then it's just a race to the bottom and then it's just a race to the bottom and then it's just a race to the bottom and the fourth fear is if I raise my prices the fourth fear is if I raise my prices the fourth fear is if I raise my prices I might wreck my business and you know I might wreck my business and you know I might wreck my business and you know what you might but the odds are really what you might but the odds are really what you might but the odds are really low I've seen hundreds if not thousands low I've seen hundreds if not thousands low I've seen hundreds if not thousands at this point of SAS companies rais at this point of SAS companies rais at this point of SAS companies rais their prices and there's been a handful their prices and there's been a handful their prices and there's been a handful of times that I've seen folks have to of times that I've seen folks have to of times that I've seen folks have to roll them back but I believe it's only roll them back but I believe it's only roll them back but I believe it's only once that I've ever seen someone once that I've ever seen someone once that I've ever seen someone actually break their business by raising actually break their business by raising actually break their business by raising their prices and in fact it wasn't their prices and in fact it wasn't their prices and in fact it wasn't because they raised their prices it was because they raised their prices it was because they raised their prices it was because they raised them they got new because they raised them they got new because they raised them they got new information several other competitors information several other competitors information several other competitors dropped their prices and they didn't dropped their prices and they didn't dropped their prices and they didn't drop their prices quickly enough they drop their prices quickly enough they drop their prices quickly enough they didn't follow suit they didn't take the didn't follow suit they didn't take the didn't follow suit they didn't take the data that the market and their data that the market and their data that the market and their competitors and their customers were competitors and their customers were competitors and their customers were giving them and they failed to react so giving them and they failed to react so giving them and they failed to react so while raising their prices was you could while raising their prices was you could while raising their prices was you could say a cause of this really the cause was say a cause of this really the cause was say a cause of this really the cause was them not reacting quickly enough now them not reacting quickly enough now them not reacting quickly enough now let's talk about why you should charge let's talk about why you should charge let's talk about why you should charge more realistically pricing is the more realistically pricing is the more realistically pricing is the biggest lever in SAS it's the the one biggest lever in SAS it's the the one biggest lever in SAS it's the the one thing that if you get wrong can create a thing that if you get wrong can create a thing that if you get wrong can create a terrible business and if you get right terrible business and if you get right terrible business and if you get right can cause you to have a business that's can cause you to have a business that's can cause you to have a business that's 2 three 4 five times more valuable and 2 three 4 five times more valuable and 2 three 4 five times more valuable and more successful than if you don't nail more successful than if you don't nail more successful than if you don't nail your pricing the first order effect of your pricing the first order effect of your pricing the first order effect of raising prices is that you get more Mr raising prices is that you get more Mr raising prices is that you get more Mr or ARR and it's that you start to grow or ARR and it's that you start to grow or ARR and it's that you start to grow faster I have given a talk on pricing in faster I have given a talk on pricing in faster I have given a talk on pricing in the past and I used a couple screenshots the past and I used a couple screenshots the past and I used a couple screenshots of tiny seed companies that started of tiny seed companies that started of tiny seed companies that started their batch year with us in May and then their batch year with us in May and then their batch year with us in May and then raised their price prices in May or June raised their price prices in May or June raised their price prices in May or June due to our urging and frankly Our advice due to our urging and frankly Our advice due to our urging and frankly Our advice of we think you're underpriced in this

of we think you're underpriced in this of we think you're underpriced in this market and these graphs show the mrr market and these graphs show the mrr market and these graphs show the mrr growth start to increase pretty growth start to increase pretty growth start to increase pretty significantly and the business being significantly and the business being significantly and the business being really a completely different business really a completely different business really a completely different business than if they hadn't raised the prices than if they hadn't raised the prices than if they hadn't raised the prices there are also a couple second order there are also a couple second order there are also a couple second order effects one of them is churn so for more effects one of them is churn so for more effects one of them is churn so for more than a decade I've been saying that than a decade I've been saying that than a decade I've been saying that lower paying customers churn faster and lower paying customers churn faster and lower paying customers churn faster and there's an anonymous Tiny Seed company there's an anonymous Tiny Seed company there's an anonymous Tiny Seed company that segmented their churn and segment a that segmented their churn and segment a that segmented their churn and segment a was paying them $29 a month and segment was paying them $29 a month and segment was paying them $29 a month and segment B was paying them $99 a month and up and B was paying them $99 a month and up and B was paying them $99 a month and up and if you look at the net revenue turn if you look at the net revenue turn if you look at the net revenue turn between the two groups it's staggering between the two groups it's staggering between the two groups it's staggering the net revenue turn of the low paying the net revenue turn of the low paying the net revenue turn of the low paying customers was over 11% the net revenue customers was over 11% the net revenue customers was over 11% the net revenue turn of the high paying customers was turn of the high paying customers was turn of the high paying customers was net negative 4% so think about trying to net negative 4% so think about trying to net negative 4% so think about trying to grow a company with 11% turn which means grow a company with 11% turn which means grow a company with 11% turn which means your business is on fire versus minus 4% your business is on fire versus minus 4% your business is on fire versus minus 4% it's not even in the same ballpark that it's not even in the same ballpark that it's not even in the same ballpark that single metric can be the difference single metric can be the difference single metric can be the difference between A4 million doll a year business between A4 million doll a year business between A4 million doll a year business and a business doing a million or 1.25 and a business doing a million or 1.25 and a business doing a million or 1.25 million it's incredible now I have a million it's incredible now I have a million it's incredible now I have a story about a Tiny Seed company called story about a Tiny Seed company called story about a Tiny Seed company called gather that when they joined Tiny Seed gather that when they joined Tiny Seed gather that when they joined Tiny Seed were charging $39 a month for their were charging $39 a month for their were charging $39 a month for their cheapest plan 39 and 79 were their two cheapest plan 39 and 79 were their two cheapest plan 39 and 79 were their two plans and their business was not viable plans and their business was not viable plans and their business was not viable they couldn't do sales calls at the they couldn't do sales calls at the they couldn't do sales calls at the scale they needed and grow the business scale they needed and grow the business scale they needed and grow the business and so pretty quickly we encouraged them and so pretty quickly we encouraged them and so pretty quickly we encouraged them to raise their prices and they were you to raise their prices and they were you to raise their prices and they were you know rightfully so they were concerned know rightfully so they were concerned know rightfully so they were concerned that they would not get any more that they would not get any more that they would not get any more customers so they went from 39 to 99 and customers so they went from 39 to 99 and customers so they went from 39 to 99 and 79 to 159 and there was no difference in 79 to 159 and there was no difference in 79 to 159 and there was no difference in conversion and these days they've gone conversion and these days they've gone conversion and these days they've gone up even further their lowest plan is up even further their lowest plan is up even further their lowest plan is still 99 but their mid plan is $1.99 and still 99 but their mid plan is $1.99 and still 99 but their mid plan is $1.99 and of course they have a custom pricing

of course they have a custom pricing of course they have a custom pricing plan but these changes alone took them I plan but these changes alone took them I plan but these changes alone took them I don't remember if it was 6 months or don't remember if it was 6 months or don't remember if it was 6 months or eight months as they raised their eight months as they raised their eight months as they raised their pricing and it did change the business pricing and it did change the business pricing and it did change the business churn went down they lost some solo churn went down they lost some solo churn went down they lost some solo customers and some I'll say more price customers and some I'll say more price customers and some I'll say more price sensitive customers but it really helped sensitive customers but it really helped sensitive customers but it really helped accelerate their growth all right so accelerate their growth all right so accelerate their growth all right so let's say you believe me and you want to let's say you believe me and you want to let's say you believe me and you want to raise your prices how should you do it raise your prices how should you do it raise your prices how should you do it first I'm going to start with a couple first I'm going to start with a couple first I'm going to start with a couple quick tips the first one is you can quick tips the first one is you can quick tips the first one is you can effectively raise your prices by effectively raise your prices by effectively raise your prices by decreasing the value or the thresholds decreasing the value or the thresholds decreasing the value or the thresholds on your value metric on a specific plan on your value metric on a specific plan on your value metric on a specific plan so if right now you give 3,000 contacts so if right now you give 3,000 contacts so if right now you give 3,000 contacts or subscribers for $49 you can give or subscribers for $49 you can give or subscribers for $49 you can give $2500 for $49 you just reduce the value $2500 for $49 you just reduce the value $2500 for $49 you just reduce the value metric on one or all of your plans the metric on one or all of your plans the metric on one or all of your plans the second idea is you can just drop your second idea is you can just drop your second idea is you can just drop your lowest plan so if you have 1949 and 99 lowest plan so if you have 1949 and 99 lowest plan so if you have 1949 and 99 you could just go to$ 49.99 and call us you could just go to$ 49.99 and call us you could just go to$ 49.99 and call us it's an easy way to experiment with this it's an easy way to experiment with this it's an easy way to experiment with this and to get comfortable with the idea of and to get comfortable with the idea of and to get comfortable with the idea of maybe not having that cheapest plan the maybe not having that cheapest plan the maybe not having that cheapest plan the Third tip I'm going to give you is that Third tip I'm going to give you is that Third tip I'm going to give you is that split testing pricing is very very split testing pricing is very very split testing pricing is very very difficult I've seen approximately zero difficult I've seen approximately zero difficult I've seen approximately zero SAS companies do this there's been one SAS companies do this there's been one SAS companies do this there's been one or two but realistically most or two but realistically most or two but realistically most bootstrappers all bootstrappers are not bootstrappers all bootstrappers are not bootstrappers all bootstrappers are not going to have the volume to truly split going to have the volume to truly split going to have the volume to truly split test your pricing so you are going to test your pricing so you are going to test your pricing so you are going to have to take a leap of faith and just have to take a leap of faith and just have to take a leap of faith and just watch your numbers carefully so if I was watch your numbers carefully so if I was watch your numbers carefully so if I was going to raise prices first I would going to raise prices first I would going to raise prices first I would decide if this is an experiment versus decide if this is an experiment versus decide if this is an experiment versus certainty so if it's an experiment and certainty so if it's an experiment and certainty so if it's an experiment and I'm tentative then I treat it like one I I'm tentative then I treat it like one I I'm tentative then I treat it like one I make it easily reversible and I watch my make it easily reversible and I watch my make it easily reversible and I watch my numbers like a hawk but if it's a numbers like a hawk but if it's a numbers like a hawk but if it's a certainty I've actually made price certainty I've actually made price certainty I've actually made price increases into a marketable event where increases into a marketable event where increases into a marketable event where I email everyone in my trial funnel and I email everyone in my trial funnel and I email everyone in my trial funnel and people who are not customers and people

people who are not customers and people people who are not customers and people who are customers and I try to drive who are customers and I try to drive who are customers and I try to drive either annual conversions ahead of the either annual conversions ahead of the either annual conversions ahead of the pricing update and I say if you'll sign pricing update and I say if you'll sign pricing update and I say if you'll sign up before this certain date we will be up before this certain date we will be up before this certain date we will be able to honor our current pricing even able to honor our current pricing even able to honor our current pricing even though we're raising them in a couple though we're raising them in a couple though we're raising them in a couple weeks now I want to separate raising weeks now I want to separate raising weeks now I want to separate raising prices for new customers versus prices for new customers versus prices for new customers versus grandfathering which involves your grandfathering which involves your grandfathering which involves your existing customers they're two separate existing customers they're two separate existing customers they're two separate things and you don't have to do the same things and you don't have to do the same things and you don't have to do the same for both so you could just change it for for both so you could just change it for for both so you could just change it for new customers and kind of sit back and new customers and kind of sit back and new customers and kind of sit back and watch it for a month two three and then watch it for a month two three and then watch it for a month two three and then once you realize my pricing dialed in once you realize my pricing dialed in once you realize my pricing dialed in then you can decide if you want to go then you can decide if you want to go then you can decide if you want to go back to existing customers and raise it back to existing customers and raise it back to existing customers and raise it or not so the concept of whether to or not so the concept of whether to or not so the concept of whether to raise non-existing customers is called raise non-existing customers is called raise non-existing customers is called grandfathering if you grandfather grandfathering if you grandfather grandfathering if you grandfather existing customers in then you don't existing customers in then you don't existing customers in then you don't raise the prices on them and the reason raise the prices on them and the reason raise the prices on them and the reason you should consider it is if you raise you should consider it is if you raise you should consider it is if you raise prices you will see some churn you'll prices you will see some churn you'll prices you will see some churn you'll have a lot of support complaints and a have a lot of support complaints and a have a lot of support complaints and a support burden and you could potentially support burden and you could potentially support burden and you could potentially damage your brand or your reputation but damage your brand or your reputation but damage your brand or your reputation but realistically and most cases raising realistically and most cases raising realistically and most cases raising prices on all your customers is usually prices on all your customers is usually prices on all your customers is usually not always It's usually the right answer not always It's usually the right answer not always It's usually the right answer you just need to make sure to you just need to make sure to you just need to make sure to communicate it really well you want to communicate it really well you want to communicate it really well you want to give at least 2 months of notice but not give at least 2 months of notice but not give at least 2 months of notice but not more than 6 months and my rule for more than 6 months and my rule for more than 6 months and my rule for raising prices is if raising your prices raising prices is if raising your prices raising prices is if raising your prices on existing customers will not grow your on existing customers will not grow your on existing customers will not grow your Mr by at least 15% it's probably not Mr by at least 15% it's probably not Mr by at least 15% it's probably not worth it that's Rob's rule of 15 in worth it that's Rob's rule of 15 in worth it that's Rob's rule of 15 in addition I never promise to grandfather addition I never promise to grandfather addition I never promise to grandfather for life and you should not either for life and you should not either for life and you should not either because in a year or 3 years or 5 years because in a year or 3 years or 5 years because in a year or 3 years or 5 years you may want to raise prices so never you may want to raise prices so never you may want to raise prices so never say that anything is for Life finally I say that anything is for Life finally I say that anything is for Life finally I want to talk about the messaging of want to talk about the messaging of want to talk about the messaging of raising your prices there's uh an raising your prices there's uh an raising your prices there's uh an interesting structure to price increase interesting structure to price increase interesting structure to price increase messages that I went and backed out of

messages that I went and backed out of messages that I went and backed out of several well constructed price increase several well constructed price increase several well constructed price increase emails and blog posts first thing you do emails and blog posts first thing you do emails and blog posts first thing you do is you set the stage then you say we're is you set the stage then you say we're is you set the stage then you say we're changing our pricing the third point is changing our pricing the third point is changing our pricing the third point is a high level justification and then a high level justification and then a high level justification and then there's two optional points you can give there's two optional points you can give there's two optional points you can give more specifics about who it impacts and more specifics about who it impacts and more specifics about who it impacts and when you can give more justification and when you can give more justification and when you can give more justification and then finally please reach out with then finally please reach out with then finally please reach out with questions and if you want to see exactly questions and if you want to see exactly questions and if you want to see exactly the message that I've been referencing the message that I've been referencing the message that I've been referencing in this video that Jordan G used to in this video that Jordan G used to in this video that Jordan G used to raise pricing for cart hook go to the raise pricing for cart hook go to the raise pricing for cart hook go to the link on the screen right now or that's link on the screen right now or that's link on the screen right now or that's in this video's description and you can in this video's description and you can in this video's description and you can see the blog post that cart hook put out see the blog post that cart hook put out see the blog post that cart hook put out in the Wayback machine I know I packed a in the Wayback machine I know I packed a in the Wayback machine I know I packed a lot into this video if after watching lot into this video if after watching lot into this video if after watching this video You're convinced you need to this video You're convinced you need to this video You're convinced you need to increase your prices you'll want to go increase your prices you'll want to go increase your prices you'll want to go watch this next video where I go even watch this next video where I go even watch this next video where I go even more in depth on the topic during a 48 more in depth on the topic during a 48 more in depth on the topic during a 48 minute conference talk and if you found minute conference talk and if you found minute conference talk and if you found this helpful make sure you like And this helpful make sure you like And this helpful make sure you like And subscribe to the channel I'll see you subscribe to the channel I'll see you subscribe to the channel I'll see you next time thanks for watching h