80/20 Pricing your most valuable asset

What does 80/20 say about how you put a price on your time?

In my last email I shared a lesson I learned in the apartment rental business. People there know that a 5% vacancy rate will give you the most profit. I believe this is true of any commodity. But 80/20 says there’s no such thing as a commodity (more on that in a moment).

As an example, we talked about a sports coach that gets $35 per 1 hour lesson. Let’s say he kept a 5% “vacancy rate” and is working 38 hours per week at $35 per hour. We can plug this into 8020curve.com:

38 out of 40 hours @ $35/hr

We can see that he currently makes $1,330 per week. Pretty simple math.

If we click on the button labeled “Specify Total Output Of All Members”, it will be like adding up all the columns. The total available revenue should be $4,323.68 – over three times as much as his current earnings!

Why is he working for a one third what he is worth? Because he took his hours and priced them all the same. He created a commodity. But again, 80/20 says there is no such thing as a commodity.

The value of the hours we work is not the same for every hour we work. Some hours are valuable than others. Yet we are conditioned to believe that every hour should be priced the same! How do we break this costly habit?

This is where alchemy comes in.

What if he were to have three levels of coaching – one for beginners, one for more advanced players and one for the superstars? Maybe the pricing would depend upon which league they play in. How you implement the idea is more alchemy, and way beyond the scope of this email! (However, it is where the “rubber meets the road” and is something I personally find very exciting and rewarding.)

Do all your customers talk to each other? Probably not. So you can change your pricing in one niche without affecting another niche. Maybe you need different products with different sets of marketing materials. But for three times the money, wouldn’t it be worth it?

If we go back to 8020curve.com and hover over the last bar on the right, it indicates that one of the guys would pay $800 for the right coach – even though he’s only currently paying $35!

Now, the $800 per hour cat may be out of reach. Even though he’s willing and able to pay that much for coaching, I’m not sure this $35 per hour guy is going to make the cut.

But … maybe he can find a former pro ball player that can coach, and our guy can get a commission. There’s always a way if you are willing to think creatively about it.

So the moral of the story is:

Don’t commoditize the value of your time. MAXIMIZE the value of your time.

Perry talks a lot about that in his 80/20 Sales and Marketing. The time you spend thinking about this will be some of the most valuable time you can spend (if you take action).

What the 8020curve.com tool can do for you is show you how much money you’re leaving on the table.

tempus fugit ergo carpe diem