3 Days To Cash Workbook
Module 7
Pricing and Revenue Model
knowing what it will take to reach those goals. Initially, your goal may be getting
an extra $500 – $1,000 in your bank account every month – so it’s important to
know what your Cash Machine has to produce to make that a reality.
This process is called Revenue Modeling and it’s something you will do often as
your Cash Machine grows and your vision expands. It’s the process of taking
your total financial goals and then dividing them down to the month, week, and
daily targets that will make it a reality.
Your Revenue Model will be the tool you will use to set your service pricing or
determine how much service/product you will have to sell to reach that goal.
Now that we’ve clearly established the basis of your business, you can begin
thinking about the numbers and prices.
To start, we use a simple formula:
GOAL / 12 / 4 / 5
How much extra money do you want to make per year? For our example,
we’ll use $1,000 more a month. That would mean an additional $12,000 for
the year.
You know your annual goal is $12,000, so our formula will tell you what your
monthly, weekly, and daily goals will be.
• Divide the number goal by 12 months: 12,000 / 12 = $1,000.
• Divide the number month goal by 4 weeks: $1,000 / 4 = $250
• Divide the number weekly goal by 5 days: $250 / 4 = $62.50.
Using this formula you can see that simply generating this shows us that you
would need to generate a total of $62.50 each day which would allow you to
reach your goal of an extra $12,000 per year.
Once you know how much you need to earn, it’s time to look at what your
competitors are charging. You can begin to select a price for your service.
Using this number, you can determine how much of your product or service you
need to sell each day. Then, you can determine how many sales of each item is
required daily to reach that goal of $12,000 extra a year.
Using this information, you see how much you need to sell at the going market
rate for your service to meet your financial daily goals. By using this formula and
backing into your total amount, you can also begin to set prices for each of the
different product or service levels in your funnel based on this information and
the prevailing market rate for your service or product. In addition, your research
into model companies can also provide you with some clues of your pricing
compared to the market. Don’t offer the lowest prices. Make sure you have a
profit margin.
Knowing your base revenue goals will help you look at how to price your
products and services competitively. Reaching your goal total may require selling
only two of your products or services. That might allow you to lower your price
and do three instead of two. You’d still reach your goal and could lower your
price – it would only take one more sale on your part.
However, it is important not to get too caught up in being “competitive” compared
to the rest of your market. Although it may seem practical to price yourself
slightly below the lowest model company or prevailing market rate of your
competitors, this will often set you back from reaching your goals. Companies
who have been in business long enough to establish their product as the
prevailing rate have done it over time and often make that price possible because
they are selling a high volume of their product – making the lower price easier to
handle.
As you are starting out, you may not have the volume of customers to make
competitive pricing a success. At this stage, it’s better to build your pricing
around your Revenue Models goals and prove your value with quality work and
great service. Later on, you can determine how to price your products more
competitively. You will be able to do this once you have developed a strong
customer base. Remember, “cheap” doesn’t always mean “best.”
Resist the urge to drop your prices. The first instinct of most people who want to
launch a Cash Machine is to set their prices below those of similar businesses.
Most people think they can entice customers with the lower price. You tell
yourself that having a lower price will help you attract customers, but this will also
create the perception that you are not as confident and that your products and
services are not worth as much as “real businesses.”
Price cutting is not the most effective method to win clients, so don’t even bother
fighting on that front. If price were really the only criteria people use to decide
where to shop, Walmart would be the only store in town and McDonalds would
be the only restaurant – but they’re not.
Imagine a car company found out that people were not buying their car because
it had huge safety issues. It wouldn’t make any sense for the company to try and
win customers to this car by lowing the price. Most consumers would rather pay
more for a quality product than save some money and get a vehicle that might
have a higher risk of crashing. If this car company wants to win customers they
must do it with a quality product that meets the expectations of consumers, plain
and simple.
People will spend money where they are comfortable, receive personal attention,
and know they can rely on the quality of service you provide.
Many people are uncomfortable when it comes to asking for the sale. And they
often price their products too low. Your products and services aren’t worth as
much as those offered by other companies. They’re worth more.
Look through your notes about the other Model Companies. After doing this
research, you found ways that you can make your products and services distinct.
You’re going to offer more convenience, higher quality, better service, or
something else that makes you stand out from the crowd. Sometimes just being
available on the phone to answer questions will create that distinct perceived
value above your competition – and that’s all it takes.
Whatever distinction you’ve come up with gives you more value – price
won’t even matter. People will pay more for value. All you need to do is
make sure they’re aware of the value you bring to their life.
The “Job You Don’t Want to Do…”
One of the fastest ways to create more cash is to do the job you don’t want to do.
You have the skills, but you don’t like the work. In my many years of coaching, I
have seen this many times where people avoid “the jobs they don’t want to do.”
You know the jobs I’m talking about. For some people these are the “messy”
jobs, or the “back breaking” jobs, or the “loud” jobs. For every person on the
planet there is a different list of jobs they just don’t want to do. In some cases,
this may be holding you back from you’re your fastest path to cash.
Take the example of a landscape architect. This is a great industry, but can
sometimes be a hard sell because people consider it a “luxury” they can’t afford.
Or, they believe their money would be better spent elsewhere. However, if you
break it out into a product funnel, a practical initial contact or “first date” can be
as simple as a consultation on basic yard service – lawn trimming, edging, and
some weeding. Once you’ve developed trust, not only can you upsell the client
into landscape architecture, you can also continue your relationship with ongoing
maintenance.
I’m sure there are landscape architects out there who would shudder at the
thought of cutting the lawn and pulling weeds, but they are not seeing that it’s just
a means to end. Getting people into your product funnel is the key to getting to
your ultimate goal of having a strong and sustainable Cash Machine.
Being willing to do the “jobs you don’t want to do” is your ticket in the door to
potential customers. If this landscape architect is unwilling to do the “little” jobs,
how will he ever be in the position to offer his architect services? And who said
you have to do all the work yourself. Get the cash flowing in the door and then
you can build a team and add other people to do the things you don’t like to do.
Instead of being bottled in one niche, you now have a much larger industry to
target and can easily add team to provide the service.
Realistic Goals
As I teach my clients this process and they work with my personal coaching and
mentoring staff they always start to see the growth potential of Cash Machines.
You may already be thinking ahead to a time when making an extra $1,000 a
month is a distant memory – you’re making $10,000 a month and growing all the
time.
This is great! You’re opening up your mind to the possibilities and seeing that
there is no limit to what you can create when you have a strong business model
behind you. And, while I’m excited to see you opening your mind to all the
possibilities, I want you to remember that you’re still here, at the beginning, just
starting your Cash Machine.
You can’t make your first million until you’ve made your first dollar. Everything is
possible. Most of us don’t even realize the abundance around us. When you
open your mind to the possibility that you have a service to provide to the world,
the world responds accordingly.
There are no magic tricks surrounding this process, it is all about your level of
commitment to follow the process, do the work, and replicate your success.
Regardless of anyone’s opinion, building a successful business is something
everyone anyone can do. You have the skills, and you’ve probably discovered
throughout the past two sections that you’re capable of so much more than you
ever thought possible.
Sometimes, when we you talk to friends and family about starting a business and
creating new cash, they will react negatively. They might say something like, “I
had a good friend that started a business once and he went out of business in 18
months and lost everything he had!”
It’s tough to hear the pessimism of others, but there is truth in this story. People
start businesses all the time, and they fail. And by now, you already know the
reason – they didn’t follow the program, they didn’t model their success, they
didn’t have a mentor and coach showing them the way, they tried to reinvent the
wheel. Even though this conversation about other people’s failures can be
painful, it also proves the point about why most people fail to take advantage of
the opportunities presented to them. And why others try to hit the ground running
before they can even walk – they try doing it their own way and then suffer the
painful consequences.
One of the key lessons I teach to every one of my clients is to maintain realistic
goals. By nature, many of us are inclined to set these our goals either too high or
too low. If you set your goals too high, calculating the numbers and running your
revenue models can make you feel discouraged – like the numbers you’re
looking at are so far out there it may as well be millions. If the numbers are too
low, you may actually be sabotaging your own efforts by “taking it easy” once you
do reach your goal.
You can’t make your first million until you’ve made your first dollar.
This might be your first trip to the “gym.” You’ve never developed your money
muscles, so you will quickly discover the shifts you require in your life to be
successful. You will realize that there are things you have to do, movements you
have to make, and endurance you have to build to be successful. It can be
daunting to finally hit the gym and then see the other muscular, fit people there
and feel totally out of your element.
The same feelings are true when you’re building your Cash Machine. You may
start the process only to look around at other businesses that are flourishing and
think you can’t do it. You feel you don’t have the stamina or expertise to make it
work. You will quickly discover all of the distractions and fears from your life that
sabotage your progress and prevent you from creating new cash.
If you are ever wonder how committed you are to the success of your Cash
Machine, take a look at your bank account. Your bank account will tell you right
away how committed you are to the effort because it will either have money in it
or it won’t. Simply put, your success is completely in your hands. I am giving you
the same formula I teach all my clients. And, while I can give you the formula,
you have to be the one to put all the pieces together and make it work for you.
It all starts with your goals. Begin by setting something in motion that you can
see yourself accomplishing. Choose something you can celebrate as a victory
when you finally do.
Even though we used $1,000 in the example above, this number may be too big
or too small for you. The numbers are directly related to your time, effort, and
commitment. Do not spend as much time on them as you would on taking the
next steps.Your goals will be based on what it takes to start breaking even and
getting ahead in your life. You may find that you are so far behind in your
finances that the amount of money it would take to catch up is too big for your
first goal. That’s okay. Start smaller and build up to that number. Then, when you
reach it, choose a bigger goal and go for it. This is a progressive process and
you’re the only one that can set the bar. So set it somewhere a goal that you can
reach with a little extra effort and diligent committed action.
Building Your Revenue Model
Now that you have identified how much you want to earn per month, you need to
figure out how to reach your goal. It’s not enough to know what your product
funnel is, you need to plan how much of each product or service to sell each
month.
Your revenue model is how you convert your product funnel into a strategy. This
is why you must complete your product funnel first, so you know exactly what you
will be selling. Your revenue model is another opportunity for you to determine
where there are gaps, where you could add a new product or service, or what
strategies might not work.
The revenue model will also show you:
• How many leads you must generate each day to meet your sales goals.
• How many of those leads must become paying customers each day.
• Large gaps or jumps in price as clients move from one stage to the next.
As an example, let’s say our goal is to make an extra $1,000 in our first a month
of business, how much product do you need to sell? Let’s take a look at a simple
example first. Then, we’re going to look at how the people in our case studies
accomplished this.
Remember, this is an estimate. Over time, you will change these numbers based
on actual results.
For now, let’s look at a basic example of how that would work:
Product Name Price Revenue
Goal
Number of
Sales
Needed Per
Month
Product 1 $15 $300 20
Product 2 $50 $500 10
Product 3 $100 $200 2
The problem with the example above is that it helps you calculate what it would
take to make a gross income of $1,000 per month, but it does not include any of
your ongoing expenses. Every business has some sort of expenses, whether it
is the cost of printing flyers, the cost of hosting a website, or the cost of the gas it
takes to drive to a sales appointment.
For the purpose of our conversation, we care much more about net income,
which is the amount you take home each month. When you want to make
$1,000 a month, you want to put that cash in your pocket, not back into the
business.
An effective revenue model will help you monitor these expenses, adjust your
goals (if they are too low or too high), and help keep you focused on exactly
which activities are the best use of your time.
Let’s take a look at some examples!
Case Study Example: Jennifer and Todd H.
Business: Senior Care and Errand Service
Monthly Goal: $10,000
For this example, we will use three products from the sales funnel.
• Basic Errand Service
• Transportation to Appointments
• In-Home Care
Based on their initial projections, they would be able to sell the following per
month:
Items # Month 1
Basic Errand Service # 50
Appointment Transportation # 25
In-Home Care # 10
This shows the number of sales needed. As a result, you can determine the price
of each product. You should also think about how many leads you must generate
to earn that amount of sales.
Revenues Sales Price Total
Basic Errand Service 50 $50 $2,500
Appointment Transportation 25 $100 $2,500
In-Home Care 10 $500 $5,000
Although this takes Jennifer and Todd to a gross income of $10,000, they still
have not added on their expenses.
Expenses Month 1
Computer $1,000
Advertising $1,000
Travel $250
Telephone $50
Total Expenses $2,300
As a result, the revenue model demonstrates a gap between the sales
projections and the net income.
Gross Income $10,000
Net Income (Minus Expenses) $7,700
Jennifer and Todd will either need to make more sales or change their prices to
meet their monthly goal.
Case Study Example: Nancy B.
Business: Life Skills Training and After School Program
Monthly Goal: $1,000
For this example, we will use three products from Nancy’s sales funnel.
• Evening Parent/Child Cooking Class (Sold By Class)
• Evening Parent/Child Magic Class (Sold By Class)
• Life Skills After School Program (Sold By Month)
Based on Nancy’s initial projections, she would be able to sell the following per
month:
Items # Month 1
Evening Parent/Child Cooking # 30
Evening Parent/Child Magic # 30
Life Skills After School Program # 15
Again, these numbers help Nancy identify what she needs to do to generate the
necessary sales numbers. Let’s see how she worked out her pricing.
Revenues Sales Price Total
Evening Parent/Child Cooking 30 $50 $1,500
Evening Parent/Child Magic 30 $75 $2,250
Life Skills After School Program 15 $250 $3,750
As you can see, Nancy’s gross income is $7,500, which is FAR above her initial
monthly projection of $1,000 per month. Let’s see how she things looks when we
add in her expenses!
Expenses Month 1
Rent $500
Snacks and Beverages $1,000
Magic Supplies (for class) $100
Cooking Supplies (for class) $250
Advertising – Printed Flyers $100
Total Expenses $1,950
Nancy has a fair amount of expenses due to the supplies needed to run her
program and classes, but they are still only a small percentage of her overall
revenue.
Gross Income $7,500
Net Income (Minus Expenses) $5,550
Nancy is a prime example of an entrepreneur with very low expectations. Not
only did she perform far above her original projections, but she also could likely
raise her monthly price on the afterschool program slightly without much
argument. At its current price, Nancy is only charging $12.50 a day for such a
valuable service!
Case Study Example: Samantha W.
Business: Event Planning and Management Services
Monthly Goal: $2,500
For this example, we will use three products from Samantha’s sales funnel.
• Do-It-Yourself Event Planning Kit
• Small Event Planning
• Large Event Planning
Based on Samantha’s initial projections, she would be able to sell the following
per month:
Items # Month 1
Do-It-Yourself Event Planning Kit # 20
Small Event Planning # 5
Large Event Planning # 2
Samantha then planned out her pricing accordingly.
Revenues Sales Price Total
Do-It-Yourself Event Planning Kit 20 $100 $2,000
Small Event Planning 5 $250 $1,250
Large Event Planning 2 $500 $1,000
Samantha’s gross income adds up to $4,250. Now, let’s take a look at her
expenses.
Expenses Month 1
Computer $500
Website $250
Advertising $500
Travel $200
Telephone $50
Event Supplies $250
Total Expenses $1,750
When the expenses are added up, Samantha looks like she’s coming in close to
her target.
Gross Income $4,250
Net Income (Minus Expenses) $2,500
Just as Samantha is a master event planner, she is dead on with her sales
prediction and what is needed to meet her goal.
Case Study Example: Joe O.
Business: Website and Social Media Consulting
Monthly Goal: $500
For this example, we will use three products from Joe’s sales funnel.
• Social Media Training Teleseminar
• Website Design Teleseminar
• Website Design
Based on Joe’s initial projections, he would be able to sell the following per
month:
Items # Month 1
Social Media Training Teleseminar # 10
Website Design Teleseminar # 4
Website Design # 1
Since web design can become costly depending on the services a customer may
want, Joe was hesitant to add more than one new design client for the month.
Revenues Sales Price Total
Social Media Training
Teleseminar
10 $25 $250
Website Design Teleseminar 4 $50 $200
Website Design 1 $500 $500
As you can see from our model, there are a few problems with Joe’s funnel. It
may be a bit difficult for a customer to jump from a $50 website design
teleseminar to a $500 web design package, so Joe was encouraged to look into
a product to “bridge the gap” between those items. Eventually, he added a $250
social media package into the mix.
Expenses Month 1
Websites $100
Advertising $100
Travel $100
Telephone $50
Total Expenses $350
When the expenses are in, Joe looks pretty close!
Gross Income $950
Net Income (Minus Expenses) $600
Although Joe met his goal, he has a lot of room to grow in this area. With a few
more bridge products or creative package design, he could very quickly take his
business to the next level.
Exercise: Complete Your Revenue Model
Using the case studies above and your information gathered from Module 1,
create your revenue model.
The examples above created a model that covered the first month of business.
Your first model will look out over a longer period of time.
By the end, the revenue model will help you:
• Determine appropriate pricing for your products or services
• Identify gaps in your offer
• Provide you with the exact numbers you will need to meet your goal
Here’s how to complete your revenue model:
Step 1: Write the name of your products
Step 2: Identify how many products you think you can sell in a month
Step 3: Multiply the number of products by the price
Step 4: Make a list of your monthly expenses
Step 5: Calculate your net income by subtracting expenses from your revenues
Use the blank forms in the Education Center to complete this exercise at
www.________________________.com
What’s Next?
The material covered in this module is where many business owners get stuck.
However, the modules ahead are what will be the most important to your future
success.
These exercises will take you some time, but once they are done, you must
move on to the activities most important to your business.
We’ve spent a lot of time on planning and research. You have created your
revenue models and product funnels. The groundwork has been laid and now it’s
time to actually start the engine on this Cash Machine and start making some
money.
The next steps are focused on getting new customers into your product funnel,
and that’s all about sales and marketing.
Don’t get stuck planning to plan to plan. Action is the true key to success. Many
people spend too much time thinking through things and they get stuck in their
stuck. You learn by doing. As you take action, you will learn and grow. It will also
help to build your confidence.
My goal is to help you achieve your financial goals and see you as a success
story in your personal life and an example for other people in your same
situation. The fastest path to success is by having a mentor who has been in
business before with experiences they can share with you to help you overcome
your ongoing challenges. Regardless of your experience level or the amount in
your bank account, there is always someone who can take you to the next level.
I am fully committed to your success and that’s why I have coaches ready to lead
you step by step through the process of creating a successful Cash Machine and
make sure you reach your financial freedom day.
Who will be the person in your life that challenges you to take the next level when
you are not moving forward? And who will be there to celebrate with you when
you when you’ve reached your goal?
My team and I are here to work with you through each step on your journey so
don’t waste another moment. You have enough information to get started. I
encourage you to talk with one of our coaches about your Cash Machine. They
can give you a few shortcuts to help you get started. To learn more, simply call
888-262-2402 now. We’ll provide all of the details about how we can help you.
Section Recap:
Here are the major ideas covered in Section 2:
• Defining the product funnel
• Identifying what to sell
• How to build a community of customers
• Keys to price your products and services
It’s time to move on to Section 3: Marketing with a Purpose