Lots of us dream about turning our passion into a money-making business, and it can be done! In our on-going series about starting an online business, we discuss monetizing your passion and building your business.
Remember, our goal is to earn at least $1,000 a month by month 12 of your business and to see a clear trend towards growth. If you quit your job to work on this business full time, that’s not a lot. If you still have your full-time job, bringing in an extra $12,000 a year is pretty great.
Test Your Hypothesis
You know what you want to do. Before you put any more time and effort into it, you need to find out if anyone will pay you for it. Ask anyone you know and people you don’t via small business forums, conferences, and trade shows if they would pay for what you’re selling.
Get a minimal viable product out the door. You can tinker with something forever, but the feedback you get when you push something out into public is much more valuable and takes much less time. Once you have some feedback, tweak your product based on that data.
Build a simple website where potential customers can get more information about your product. Tim Ferris recommends Facebook ads to target your particular market.
Will They Pay?
Great, your idea has created some interest. You’re excited! Don’t get too excited yet. There is only one type of validation that matters when it comes to your business. 1,000 email subscribers are not validation. 1,000 free customers are not validation. Money is validation.
If people are willing to pay money for what you are offering, it’s because you are providing them value. That’s why it’s important to charge for your product from Day 1 or as close to Day 1 as possible.
Unless you are slinging dope, the marketing strategy of giving it away for free at first knowing they will pay because they have to have what you’re selling, doesn’t work. There are plenty of things people like and enjoy but will walk away from the second there is a cost involved if they’re accustomed to getting that thing for free.
If people are paying money for what you’re doing, then you are providing value. Charge from Day 1 or as close to Day 1 as possible.
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Getting Past the Fear
Don’t be afraid to charge for your product and to charge what it is worth, not just what you think people will pay. You’re afraid to charge for all the wrong reasons. Andrew recently gave me some advice on pricing that was a light bulb moment. $100 won’t change my life. $1,000 might.
I was afraid to turn down work even if it wasn’t paying good or even decent money. But it’s better to have five clients who will pay you $1,000 than 25 clients paying you $20. The fewer clients you have, the more time you can devote to them and the higher the quality of your work will be.
Whether I am charging $1, $100, or $1,000, it takes me the same amount of time to do the work. So why am I going to waste my time for a lousy $1 or $100? I’m not. I was, but not after that piece of advice. You shouldn’t either.
Price for the customers you want. We’ve all dealt with extremely cheap people. For some reason, they also tend to be the most demanding people. More meals probably get sent back at Applebee’s than Jean George.
People often undervalue things that are free or cheap. It’s why people are more likely to take care of a brand new car they bought for themselves than a used car handed down from a family member.
In our episode on negotiation, we emphasized that if you quote a price higher than the client wants to pay, they are not likely to walk away entirely. They approached you; they already want to buy your product. If they say no, your job is to show them the value of what you do. How it will improve their business and make them money.
If they still balk, go a bit lower. If you quoted $400, offer to do it for $350, not $100. It’s important to have your walk-away number, though. At some point, there is a number that means it will cost you money to work for them and that’s when you walk away.
Eventually (hopefully) you have as many clients as you can handle. No matter how efficient you are, there is only so much time. What do you do when new clients approach you? We talked to Michael Port from Book Yourself Solid about this.
The new client has to offer you enough money to make you drop an existing client who pays you less. Ideally, a bidding war for your services breaks out. The point is, this is the cue that you can start charging more.
What to Charge
There are many things to consider when you are setting your pricing. First, do some research to find out what similar businesses are charging. If you want to sell coffee, that’s easy enough. If you are selling something like consulting services, you have to dig a bit deeper.
Contact a professional or trade organization in your field. They may be able to give you some numbers or put you in touch with those who can. Look at a site like Glassdoor to find out what larger companies are paying someone to do in-house for what you do.
Are you going to continue at your 9-5 job for the time being? If so, you can set your prices a little lower than if the business was your only source of income. It can even be beneficial to undercharge in the beginning. It can help you attract enough clients to start a portfolio.
If you get referrals from existing clients, you can increase the rates for those new clients. They are already aware of your track record and may be willing to pay more than they would for an unknown entity.
Factor in your expenses. Remember, by month 12, you are supposed to be making $1,000 a month, not just bringing in $1,000 a month.
Not a Hobby
This venture is not a hobby even if it started out as one. You want to bring in that $1,000 in month 12 so monetizing your business has to be a priority.
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