Young and Profiting with Hala Taha - Josh Kaufman: Launching a Business or Side Hustle | E106

Episode Date: March 15, 2021

Want to start a business but not sure where (or how) to start?!   In today’s episode, we are talking with Josh Kaufman, best-selling author, researcher, and speaker. Josh's TEDx talk on The First 20 Hours is one of the top 25 most-viewed TED talks published to date, with over 22 million views on YouTube. His research has been featured by The New York Times, The BBC, The Wall Street Journal, The Atlantic, Fortune, Forbes, Time, BusinessWeek, Wired, Fast Company, Financial Times, HarvardBusiness.org, The World Economic Forum, Inside Higher Ed, Lifehacker, MarketWatch, The Independent, Bloomberg TV, PBS Next Avenue, CCTV, and CNN's Sanjay Gupta MD.   In this episode, we chat about Josh’s first book, Personal MBA, signs to find a viable market if you are starting a business, and the characteristics that all good products/services have. We’ll also talk more about how to test out your business idea, actionable steps to decide pricing, learning curves, the aspects of rapid skills acquisition, and more. This is a jam packed episode that we made it into two parts - so make sure to catch both!   Social Media:   Follow YAP on IG: www.instagram.com/youngandprofiting Reach out to Hala directly at [e-mail] Follow Hala on Linkedin: www.linkedin.com/in/htaha/ Follow Hala on Instagram: www.instagram.com/yapwithhala Follow Hala on ClubHouse: @halataha Check out our website to meet the team, view show notes and transcripts: www.youngandprofiting.com   Timestamps:   04:15 - How Josh’s Degree Shaped His Career 07:43 - Why Josh Decided to Write His Book, Personal MBA 11:50 - How to Find a Viable Market  19:41 - Signs to Look for if There’s Real Opportunity  26:16 - Good Characteristics of a Product or Service 29:56 - Exceptional Product/Service in the Pandemic 32:24 - Best Ways to Test Business Ideas 35:38 - Steps to Decide Pricing  44:20 - Different Objections to Anticipate   Mentioned in the Episode:   Josh’s Website: joshkaufman.net Josh’s First Book, Personal MBA: https://personalmba.com/ Josh’s Second Book, The First 20 Hours: https://first20hours.com/ Josh’s New Book, How to Fight a Hydra: https://howtofightahydra.com/#home Learn more about your ad choices. Visit megaphone.fm/adchoices

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This week on YAP, we're chatting with Josh Kaufman, a best-selling author, researcher, and speaker whose proven shortcuts have helped millions of individuals and businesses find a way to educate themselves and reach their goals faster than ever thought possible. Josh's TEDx talk The First 20 H, has been viewed over 22 million times. This makes it one of the top 25 most viewed TED Talks published to date. His research has been featured by the New York Times, the BBC, the Wall Street Journal amongst many others,

and he's published three best sellers along the way. The first 20 hours had a fight at Hydra and the personal MBA, which is now in its 10th anniversary edition. Josh was so smart and so interesting that I ended up chatting with him for almost two hours and as a result, I've split this episode into two parts to make it more digestible for you all. In part one or this episode you're currently listening to, number 106, we concentrate on Josh's breakout book, The Personal MBA. This personal MBA book is literally taught in MBA courses around the world because it's

that good. I get so many questions from listeners asking about how to start a side hustle, how to start a new business, and especially because of COVID, we have more time on our hands, we're all at home, and everybody seems to be wanting to launch a new business. And that's why I decided that Part 1 is solely focused on launching a new business. With Josh, I cover everything from how to test an idea, how to find a good market, how to price your offering, selling tips, and more. Part 2, episode number 107, we switch gears, and we talk about something equally as interesting. How to learn any new skill in just 20 hours.

Without further ado, enjoy the first part of my conversation with Josh. Hey Josh, welcome to Young and Profiting Podcast. And thanks, hot love. It's great to be here. I'm very excited for this conversation. I think the topics that you discuss are super relevant for my audience and everyone's going to love what we're going to talk about today because it's a lot of what I get asked all the time. I always get asked, you know, how do I start a side hustle?

How do I start a business? How do I learn a new skill? And we're going to talk about all of that today. So super hyped for this conversation. Yeah, likewise, business is fun to talk about, so let's do it. It is. So, Josh, you are a very diverse person. You launched the personal MBA.

It was a book that was a breakout success. You put it out over 10 years ago, and it's now in its 10th edition. It's still a bestseller a decade later. You also have a really big popular TED Talk. It's called The First 20 Hours, and it's one of the most popular TED Talk. It's called the first 20 hours, and it's one of the most popular TED Talks out there. But I was doing some research, and I noticed that your college degree is very different

from what you do now. You went into school for business information systems, which is relevant, but real estate and philosophy as well. Some of the stuff that I talk about on this podcast is related to skill stacking and kind of acquiring skills over your experiences. And so I want to understand, how is your college degree helped shape your career in life? And have you used anything from your college degree later on in life as a successful author and speaker?

Yeah, I think there are a couple of things. I've always been curious by nature about how the world works. Part of that is reading and researching, but it's also projects and doing things to understand. My background is in technology. As you said, I have a business information system degree. It's so funny. I'm actually doing more programming now, post-degree, for my own business because I have a need that I can now solve with technology.

Then I did at any time, either during college or in my corporate career post-college. But I think there's a lot of value, and this is reflected in the third part of my book, The Personal MBA. reflected in the third part of my book, The Personal MBA, being able to think in systems and understand the world in a process-oriented way, or in a systems-oriented way, is very valuable, very useful. It helps you solve problems. It helps you understand what's going on in a way that is difficult to do in any other way.

And so I think it's, if I took anything from that technology or engineering background, it was that systems orientation. For me, the real estate was funny. Real estate for me was less of an interest in the nuts and bolts of, at that time, commercial real estate, like the actual transaction level, but a very applied, very practical way of learning finance. And so, you know, when you take a finance course in college, it's all at this very abstract

level. You know, here's a balance sheet. Here's an income statement. Here's a cash flow statement. And a lot of the concepts make sense sort of, but it's really hard to visualize what's going on. But when you imagine something like, I'm going to build a commercial office building, and then I'm going to have X number of floors to lease, and it's going to cost a certain amount to build it out.

It's going to cost a certain amount for insurance and taxes, and you create something called a pro forma, which is kind of like the business plan for a building. All of a sudden, all of these very abstract financial concepts start making a lot more sense because they're attached to something tangible in the real world. And so, yeah, I studied real estate, not because I wanted to buy and sell real estate, but because it was a very practical useful way for me to learn finance. And philosophy is and continues to be a big thing that I think about. So the personal MBA really is a book about business philosophy. Like when we're doing business, what are we doing?

What is the point? What is the purpose? What are the things that we can pay a lot of attention to? And what are the things that we don't need to worry about so much or are distractions from the core of this thing that we're doing when we're running a business? And so yeah, that approach to really trying to understand at a fundamental level what we're doing and what's important and what's not, that is in the same way that engineering was an influence in how I think about business philosophy definitely is too. That's all very interesting.

And like I said before, you're very well known for writing this book called the personal MBA. It's a very popular book. People read it in business school and I'm curious to know, did you go to business school and how did you decide that you needed to rate this book and that there was demand for a book like this? Yeah, I was very fortunate. So I went through an undergraduate business program that was structured like a master's administration degree. So all of the classic things, the case studies, the strategy taught, all of those things I got in the context of my undergrad. And as a result, I was exposed to the best of what business academia had to offer.

Through that experience, I worked in the corporate world for a number of years. And so I got the big company managerial executive management experience or worldview. And the thing that I noticed, and this was something that really stuck out at me when I was going through school, which is nobody really took a step back and tried to even define, like, what is a business? When we're business, what are we doing? try to even define like what is a business when we're business in what are we doing. It seems like the general perception of you know businesses are things that make money and if you're making money you're doing a good business and the way to become a better business person is to make more money like. There was not that attempt to take a step back and really examine what are we

doing why are we doing it what's important and And so I was working at one of the largest corporations in the world, Procter and Gamble, just out of college. And I was working with people who had just graduated from top 15 MBA programs. And I wanted to have a greater degree of confidence in my ability to really, really, truly know what I'm talking about to have good suggestions to make good decisions. But for me at that time, it didn't make any sense for me to quit my job, go back to school, borrow a bunch of money. I just needed to understand. I needed to be able to do better in my job. understand. I needed to be able to do better in my job. And so that's where the personal MBA came from. I started doing reading and research on my own. And this was in the early heyday of

blogs being a thing. I'm kind of dating myself a little bit. But it was an exciting time to be on the internet. So I was doing this project fundamentally for myself, but I was also sharing the things that I was learning with other people and lo and behold, the world is wide, and there are many, many people in the world who are interested in this sort of thing. It's helpful. And so that's when I realized that this is an idea, this is something that has the potential to help a lot of people. And so that's what turned the personal MBA from a side project into something that became my full-time work. It's so cool how you had the passion and you were trying to solve a problem for yourself

and then you realized that so many other people had this problem and then you turned it into a business. So it's like kind of like the same things that you preach in your book. You actually did yourself with the personal MBA, which is so cool. So in terms of that book, I definitely want to dive in deep. Anybody who listens to my show knows that

I don't just like talk about this or that. I really dive deep into one or two topics. And so the topic that I want to talk about today is starting a business. I've had a couple episodes on this. I had a YAPSNACS episode called Five Steps to Launch a Side Hustle. And I just started a business that's very successful. It's called GAP Media.

And so I thought it'd be great to kind of pick your reign in terms of how to start a new business, because I know so many of my listeners want to know how to do this in the right way. And a lot of people are starting a new side hustle in COVID. And it's like the hot time to start a new business now. So I'd love to start off with markets. So one of the first things that you have to do

when you're thinking about a new business idea is to have a viable market, to target a market that would have demand in your services. So what's the best way to go about determining if your market is a good enough market, if it's a viable market for your business idea? Yeah, there are a couple of very useful ideas I talk about in the personal MBA directly related to this.

One, which you've highlighted brilliantly, is that you have to have a market to begin with or the business is just not have to have a market to begin with or the businesses is just not going to work, right? So if there's not a waiting group of people ready and willing to pull out their wallet checkbook and credit card and say, yes, please, I will take one, you're going to have a hard time. And so there are a couple of things that really help in the process of finding a market that's

going to be large enough to support whatever it is that you want to do. The first, and this is related to an idea called the Iron Law of the Market, which is I think was best framed by Mark Andreson, the now-eventricapolis, but the founder of Netscape. And it just says, markets that don't exist don't care how smart you are. You can have the most brilliant idea. You can have the best technology. You can have the best of everything. And without a group of people willing to pay you, you have nothing when it comes to the

actual operation of a business. The easiest shortcut, which sounds obvious when you hear it, or if you think about it, but it's like, pay attention to what people are already spending money on because you know there's a 100% certainty that people are buying this particular thing and if you can offer it in a better way in a new way with a bit of a twist or or to a market that is not used to buying this sort of thing very often to a market that is not used to buying this sort of thing. Very often, the biggest competitor to a business is not another business.

The biggest competitor is non-consumption. People just not doing this yet, not purchasing this in this way. And so, I like to say a lot of early stage business formation looks a lot like anthropology. You're going out into the world, you're asking questions, you're looking at what people are doing and what they're not doing and what they maybe could be doing if they just knew that there was a better way of solving this particular problem. And so, you know, the early stages is you're going out, you're examining what people are doing and you're just trying

to find opportunities. Things that could be a little less frustrating, a little more efficient, a little more flexible, a little more enjoyable. And this is an idea called the Passal Premium. And so usually the more annoying something is, you know, for a broad definition of annoying, the more people are willing to pay money, perfectly good money to make that annoying thing go away. And so sometimes in the development of a business, sometimes you're solving a new problem that hasn't been solved yet, but then also sometimes you're taking an existing problem and you're just making it a little bit more fun, less annoying, less of a hassle.

From there, it gets to a point of almost triage. So, you know, you're going out into the world, you're looking at all of the potential opportunities. And if you're in this frame of mind, it's very easy to come up with a list of 500 things that you could potentially build a business out of. The world is full of opportunities like this. The question becomes which of those opportunities are your best shot? What are the ones that are going to be the most straightforward, the most rewarding, the most interesting. So what should you spend your focus on? And there are two things that really help with this. The first is understanding the fundamental structure of a business, what a business is

and what it does helps you imagine before any of this exists. Just imagine in your own mind what a business in this area might look like. And this is an idea. It's the first thing I cover in the book. It's called the Five Parts of Every Business. And so a lot of particularly early stage entrepreneurs, like I need to write a business plan. You know, how do I write a business plan? What's a book good business? Like tell me all about this. It's very, very simple. Take a sheet of paper. You're gonna write five headings on it. And these are the headings. Value creation, marketing, sales, value delivery,

and finance. And so value creation is like you're making something valuable for other people. So what are you making and who are you making it for? That's value creation. Marketing is if people don't know that you making and who are you making it for? That's value creation. Marketing is if people don't know that you exist or your thing exists, they're not going to buy it. So how are you going to get their attention and make them interested in this thing you have to sell? Marketing. Sales is once you have their attention, you need to convince them to pull out their wallet checkbook or credit card and give you money for it. That's the sales process.

How are you going to do that? Once you take someone's money, how are you going to give them the thing that you promised? Because if you don't, it's a scam. It's not a business. What is the delivery of the value you look like? And finance is very simple. So for value creation and marketing and value delivery, you're spending money.

For sales, that's the part of the business where money is flowing in. So finance is just the process of looking at how much money is flowing in from sales, how much money is flowing out in value creation, marketing, and value delivery. Are we bringing in more money than we're spending? Because if that's not the case, we're in trouble, something needs to change. But then also, is it enough? Is it enough to make all of your time and effort and attention worthwhile? Can you use the information you have at your disposal to make a better decisions about either how to spend money or how to bring more money in.

And so, really, when you look at those five steps, value creation, marketing, sales, value delivery, and finance, that's what a business is. That's what a business does. And if you don't know the answer to any one of those five steps, that's a blank that you need to fill in before the business is going to work. And so for any business idea, this is the best place to start. You need answers to these questions. You need to have a clear picture of what this looks like and how it's going to work.

And then from there, you can start to evaluate one idea versus another. Do we think the market for this is better than that? Do we think that this is something that we could build once and sell for a long period of time, or are we going to require a large amount of investment ongoing? These are things that I talk about in the personal MBA called the 10 ways to evaluate a market, which is once you have a clear idea of what's going on, then you can start to ask some more specific questions of like, is this the kind of thing that seems like it's going to be a good fit for me?

But you always start with a clear picture of what the business idea is first, and then you build on top of that by asking some more specific questions. Oh my gosh, I'm so glad that you took us back and you walked through kind of the elements of a business and what we need to think about because I think that's so important. I think that a lot of people start businesses without thinking those things through. Then they realize that their business has no margin, that their business expenses are

priced it wrong and they're not making a profit. I think all that is really, really important. So thank you for walking us back. Now let's say we did map those things out. How then can we decide or what are the signs that we should look for when it comes to our market? So like deciding if there's people that will actually want to buy our product. How do we go about understanding

if we found a good market? Yeah, let's go through some of the 10 ways to evaluate a market in more detail because there are a lot of specific useful things to think about in this process. The place I always start is urgency. Is this something that people are going to buy right away without hesitation, without caring too much about the price, without knowing all of the details. If so, you're in good shape. So for example, let's say cures to cancer. That's something that the entire world is going to buy right away.

No hesitation. Doesn't, don't care how much it costs, right? Like give it to me now. There are a lot of business ideas that fall on the extreme other end of urgency. Like, oh yeah, that's kind of cool. It's kind of interesting. When you're talking to customers, it might feel like a certain amount of apathy. I'm like, huh, okay, cool. And so, when you're evaluating an idea, the more urgency you feel from customers,

that's a really good sign that you're on the right track. Things like market size go into this category as well, right? Like, are you selling to billions of people or are you selling to 10? If you're selling to major world governments, selling to 10 customers might be, frankly, a good business if you're selling, you know, billions of dollars of goods. But in general, the larger the potential market size, the more people who want this sort of thing, the better the market is. The same thing goes with pricing potential. And so the higher the price, generally speaking, that you can charge, the more money that

flows in and the more you keep of that as profit, the more flexibility you have in terms of your pricing structure, the more opportunity there is. There are some related ideas to that too, which is cost of customer acquisition and cost of value delivery. So how much in terms of marketing and sales activity do you have to spend up front in order to get a new customer? And how much do you need to spend

to actually deliver the value to them on the back end? So you could think like an ideal business is, there's a huge market, I can sell for an enormous amount of money, it costs me almost nothing to get a new customer, and it costs me almost nothing to sell to that customer once I have them. Like that's an ideal situation to be in.

Those are the big ones, and then there are some, I call this quality of life factors. So how unique is this? Like is this something you and only you can provide? So yeah, media, for example, is you, nobody else can do that. You know, there are other things that might compete for the amount of attention, but there's not going to be another hollow.

That's not a concern. The more unique you are, the better. Speed to market, which is from the time you're doing this evaluation right now, how quickly can you have something out and selling to the market? And generally speaking, faster is better, right? You know, versus something that you would need to invest in potentially for decades before you have something to sell. That's a barrier. The same thing goes for upsell potential. And so sometimes there are very attractive businesses where the thing that you're selling upfront is not necessarily the thing that's're selling up front is not necessarily the

thing that's going to make you a lot of money over the long term, it's a way to sell other things on the back end. So the classic Gillette, Razer's, and Blades model, right? Like, the, you know, the initial upfront sale of the Razer is not as important as selling refells to the blades over a period of decades. There are a lot of businesses that fall into that category. In some senses, you can lose money on the initial sale and then just make up for it because the lifetime value of that customer is so high that each additional customer brings in

thousands and thousands of dollars in revenue. Insurance is a really great example of that. And then the last thing, which is one that I think an enormous amount about, which is evergreen potential. And so when you make this thing for sale, is this something that you need to continue to invest a lot in in order to keep it relevant and to keep it selling. So technology is the extreme example of this. Companies like Intel pouring billions of dollars into a chip fabrication factory that's going to be relevant for two years. And then those chips will be obsolete and then they'll have to build another one.

On the other example of this, books are fantastic for this because you write the book once and you just print lots of copies. And if you write it well and correctly, it continues to sell for a very long period of time. And you can update it if you want to, but you don't have to. It's going to continue to be relevant over a very long period of time. And so, yeah, in general, I really like to think about businesses, starting a business is a lot of work.

And so I like to think about like, what are the things that I could invest time, attention, money, and energy into now that are going to be just as relevant 10 years, 20 years, 30 years down the line without additional effort required on my part, because that makes every offer that I make, every business that I build, an asset that keeps ticking in the background, and then instead of continuing to invest in keeping that thing running, I can build another one, and then another one, and just over time build this portfolio of businesses

and products that continues to do well. And I think at least for my personality and the way that I like to go through life, that's a really fun way of running a business that I think is underrepresented and much more possible today than it ever has been. Young and profitors, do you have a brilliant business idea

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this podcast has it all. So don't wait, now is the time to turn your business idea into a reality by listening to the Millionaire University podcast. New episodes drop Mondays and Thursdays, find the Millionaire University podcast on Apple Spotify or wherever you get your podcasts. Oh my gosh, Josh, you are so smart. I could just hear your voice all day telling your business advice honestly. Like, I'm sure listeners are kind of loving this episode. So earlier in the conversation, you were talking about how it's really tough to get people to learn something new, to introduce a product that is not on the market, and you

essentially have to educate them about this problem that they never knew they had. And that's like such an uphill battle. It's easier to go with a product that people already know and use and create a better mouse trap for a lack of better words, right? Talk to us about some of the characteristics of a good product or service. Yeah, so I think this is something that I talk about. I think if I'm remembering correctly, it's chapter four in value delivery. There's this idea of quality, which is all about this.

What is quality? What makes a good thing good? And the definition of this actually comes out of the engineering sciences. So the engineering definition of quality is fitness for purpose. Does it do the thing that you're using the product to do? If so, yeah, that's great. If not, it's not so great and you need to improve that. And so there was a professor at Harvard Business School.

His name was David A. Garvin. And this would have been like the late A.E.D.ish, where he came up with a list or a framework of like, okay, let's go, let's take another step and try to define quality. And he broke it down into eight factors. Performance features reliability, conformance, durability, serviceability, aesthetics, and perception. So like performance is pretty straightforward. Does it do the thing? Great, if it doesn't do the thing, not great.

Features is how many things does it do? If it does more than one thing, that's awesome. You're getting more value from the product. If it only does one thing, it better do that thing really well. Reliability is like, can I rely on this? Is it going to break? Is it going to malfunction? Am I going to get a result that they didn't expect? Conformance is a more specific one. How well does it meet the established standards? So our defects come in. If this is an interchangeable part, how interchangeable are the parts? Can I rely on swapping things out if I need to?

Durability, how long will it work? Serviceability, if something goes wrong, can I fix it? Or do I need to throw it away and buy another one? And then the last two are becoming more and more important. S-thetics is, do I like it? Is it beautiful? Is it pleasurable? Is it attractive? Do I feel good when I'm using the product or the service or the offering in the way that it is intended?

And then perception is the fuzzy, reputational or social factor. Does it make other people perceive me in a certain way? Do I get a certain amount of status? Do the results that I get from using this thing outperform my expectations of it, or do they underperform? Is it not as good as I expected it to be? And so that's where you start getting into the fuzziness of things like brand, of like all of the surrounding factors of an offer Do I feel good does it make people perceive me differently is this something that that I get some intrinsic social value out of using or is this a very utilitarian thing and so I really like in general I really like Frameworks and checklists and things like this because there's a lot going on in business.

And so being able to think of like, okay, what is a good thing? Here are seven or eight factors that I can think through real quick and figure out, okay, where are we in a good spot and where could some investment be fruitful? And now with the pandemic and kind of the whole world changing, do you find anything different in terms of what creates an exceptional product or service right now? Like, does one of those characteristics kind of stand out more than ever now? Yeah, I think the socialness, just because of the nature of the time in history, where we are, where people are starved for connection, and starved for being able to interact with other people

and feel together in a time and space where we are all not together, I think there are a lot of things that would not necessarily be as valuable now. So think of the social networks as a thing and new ones popping up all the time. The demand for that has certainly increased during this period because A, people have more time and B, people have this felt human need to connect with other people and because all of the other outlets are not as available. And so this is something that, it talk about in chapter one called the core human drives, and the drive to bond, the drive to connect with other people to form relationships and

strengthen those relationships is really strong. And so when that need, when people are used to meeting that need in one way and that way is no longer available, that means that a market is going to form to meet that need in some other way. And you can see it through social media, you can see it in the rise of companies like Zoom.

There's all sorts of, that energy is going to find an outlet. And in the time that we are living now, a lot of that's happening online. And it's nice that we have the tools to solve it. Yeah, I couldn't agree more. I think digital products are just really skyrocketing right now. Even my social media agency, for example, I feel like if COVID didn't happen,

I'm not sure I would have started it so soon. I think it would have happened maybe two years from now, but there was such a big demand because everyone's just, the only game is online right now. So if you have those skills, it's a really good time to start a business. Okay. So one of the things that I want to discuss is testing our idea, Because like you said previously, you kind of outlined the factors you should think about when launching a business. I think it's important to test your idea before you invest too much money into it, before

you get outside funding. You need to make sure that it's a viable offering that people are willing to pay money for. So, what, in your opinion, is the best ways to test our idea before we launch our business? Yeah, there are a couple. And you're right, there are some critical assumptions that go into every business. Like, how much can I sell this for? And how many people are going to buy it? And how much am I going to spend?

Making the math work is a really important part of the whole process. And so there are two primary methods that I really like to use for this. The first one is the fastest and the easiest, which is called shadow testing. And this is essentially, so it has many different forms. Sometimes it's called concept testing, sometimes there are prototypes involved. But it's always this testing and idea with potential customers before you make anything. Just an idea on a sheet of paper, just presenting it to the people who are most likely to buy from you,

and asking the critical question, which is, is this something that you're willing to pay for? The strongest version of this test is you actually take orders from them. Like, yeah, sign on the dotted line. You know, we won't charge you until it's ready, but you know, essentially think of what Kickstarter is, right? Like, there's no product. There's a lot of development and sometimes manufacturing and long expensive processes that need to happen before the product is ready. But the Kickstarter, it's just a page. It's just some images.

It's some text on the internet. There's nothing there, but it's enough that potential customers can look at it and say, oh yeah, that sounds cool. That's for me. I would like to pre-order one. And Kickstarter makes that very easy to do. And so for most forms of businesses, shadow testing is something that is very, very valuable and worth doing because it can help answer that critical question immediately.

Are you making something that people are willing to pay for? The longer term form of testing that is just as if not more valuable is fuel testing. And so it's making the thing and then you as the business owner, you know, you and your staff and the people who are involved in this particular market. The best situations where the company improves

to the greatest extent most quickly are very often the companies that use the thing that they themselves make, because think of it from a speed of learning or a feedback cycle sort of thing. Like, if you're using the thing that you make and something goes wrong or something breaks or you know, it's like, you know, right away, you can act on that information much more quickly than waiting for a bug report to come in from a customer with incomplete information and incomplete context.

And so anytime there's an opportunity for you to use the thing that you make, you end up improving the quality of the product or the offer much, much faster than you otherwise would. That is such great insight. Okay, so let's say we tested, we have our business idea. You know, we wrote our little business plan. We feel that we have a viable market and a viable product. How do we decide pricing?

Like, what are the steps to decide how to price our product at this point? Okay, so there is a, there are multiple ways of doing this testing. The thing that I like about pricing, which I think is an underappreciated fact. I call this in, I think this is chapter three of the book in sales. I call this the pricing uncertainty principle, which is that prices are 100% arbitrary and malleable. You can charge any price for anything at any time without limitation.

You want to sell a rock for $10 billion, go nuts. It doesn't mean somebody's going to buy it, but you have an enormous amount of flexibility in the number that you stick next to the price tag on something. And so with that, there are a bunch of different ways that you can kind of triangulate your way into a price that makes sense. And the the methods that most commonly come up are replacement cost market comparison discounted cash flow, which is the most financial way of pricing something, and value comparison. And so, this is actually going back to our conversation of background. This is something that I learned by studying real estate, and it becomes very, very apparent when you do something like,

by studying real estate. And it becomes very, very apparent when you do something like, okay, you have a house to sell. Well, houses don't come with price tags attached to them. You have to put a price on it somehow. How are you going to do it? And so, a replacement cost is just like, well, how much did it cost to build the house? Well, that's a pretty good estimate of, at least a minimum of how much it's worth. So let's add up all of that. Let's tack on some margin to compensate for time and energy. And that's a pretty good ballpark of what something's worth. The market comparison method is very often the one that's used to sell houses.

Like, okay, let's find another house kind of like this that has already sold. Well, this house is probably roughly comparable to this other one. We'll charge this much. Discounted cash flow is like, well, okay, let's say we decided to rent this house. There's a series of payments that would come in from the use of it. And there are pretty involved financial formulas that say, okay, yeah, if you can charge $2,000, $3,000 a month for this house, then over a certain period of time, accounting for inter-shacin, you get a lump sum payment of X, that's how much the house is worth. And then you get into the one that has the most promise, which is value comparison. And value comparison is just like understanding from the customer's perspective, what is

awesome about this particular thing to the person who's buying it? How valuable are those things? And how much might they be willing to spend because this thing has unique benefits that they can't find anywhere else. So the example with a house might be a run-down, not so great house in every other respect, but if it was owned by Elvis Presley at one point, that house is going to be worth millions and millions of dollars.

Because there's something intrinsic about the house that is valuable to a certain type of customer. And so when it comes to profit and profit margin, value comparison is where you get your maximum profit and your maximum profit margin because you're really understanding what the customer is buying at four, why it's valuable, and then your pricing is specifically based on that. For entrepreneurs, there is, as a general rule, new entrepreneurs tend to systematically

under price what they're offering based on the value that they're providing. I think a lot of that comes from a certain amount of insecurity or hesitation or, you know, one, one, one, approval, not necessarily knowing what the market will bear. Like, let's play it safe and make sure that I give people good reasons to sign up for this. My general rule of thumb for new entrepreneurs is take whatever price that you are initially thinking sounds reasonable and triple it.

And you're probably in the ballpark of what the market will actually bear. If you don't feel good about tripling it, at least double it. And you're in a more happy place. I don't know about you, Hala, but I definitely fell into this trap early on. And you know, it's one of those things that it just feels so uncomfortable the first time you ask for something that in your mind seems really unreasonable. And it is a very good feeling when the market proves that no, that really, that's all in your head. You don't have to worry about it so much. The market will pay so much more than you expect.

I totally agree. I hear this all the time. People undercharge, they don't realize how much their services are worth. They don't calculate or incorporate their own time into their offering as well. I see that happen a lot. And so I totally agree. Double or triple what you were originally going to ask for. You'll be surprised.

And if somebody is willing to buy it, then you did a good job with your pricing, and then you've just got a couple more people. And maybe you need to focus it on a certain segment of your market. Maybe your product is not for everyone, right? So I totally agree. Your dog is an important part of your family. Don't settle when it comes to their health. Make the switch to fresh food made with real ingredients that are backed by science with

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Okay, so with pricing, I know you mentioned that value comparison is the best way to get the most margin, right? So talk to us about high ticket offers because this is like a buzz word now. Everybody's talking about their high ticket offer. How can we, you know, what is the best way to create a high ticket offer? What are the elements of a high ticket offer? Like, what do we need to think about there? Yeah, there are some structural advantages in having a high priced, high profit offer, whatever that offer might be. And just think about it in terms of like, you may have fewer customers who are willing to pay that price, but that also means less value delivery cost. It means less customer support. It means potentially less marketing, less sales. You know, there's a lot of advantages

to just like having a group of people who are really into whatever it is that you do, and them paying enough that you can focus a lot of time and attention on them. And so I think it's one of those things that what the high price offer is, is extremely market dependent, right? Like you're finding your super fans, you're finding the people who are the most into or get the most value of whatever it is that you have to offer.

And a lot of times, the benefits of a high value offer are pretty soft when it comes down to it. So there's a whole class, this is a concept that comes out of economics called a Viblin Good, which is essentially products that sell better because they're priced much, much higher than other things are. So think like a Rolex doesn't tell time any better than like a time X. It's the cost of the thing. It's the signaling. It's everything surrounding the purchase. That's the true value of the good.

And part of that comes from the price and the perceived exclusivity and all of those fuzzy factors around the actual product. And so yeah, I think there's a certain element of the high price offer. These are very important customers. You as a business owner are incentivized to pay an enormous amount

of attention to them and making sure they're having a good experience. And there's a certain amount of intrinsic value in that. But then there's also an enormous amount of value around the social positioning or the social status, the exclusivity, the opportunities that might come from having a more exclusive offer for the best customers that you have. Okay, so this was such great information. Now, let's say we've got our product, we've tested it, we've got our pricing, we go to, speak to our customers, we've got people who have paid, but then we start getting our first objections and sales. People are starting to give their objections. What are the different kind of objections that we can anticipate?

And how can we counteract them? Yeah, so I think there's a whole bunch of different objections that come into play whenever you're trying to convince somebody of something. And the first thing to think about or realize is there is a psychological tendency when we feel like we're being pushed into making a decision or pushed into doing something, this is an idea called a reactance.

Like there's an automatic desire to push back. So think of the stereotypical really bad used car salesman who's just trying to sell you anything as long as you buy it today. That's something that you want to avoid the feeling or avoid the perception of because it actually works very much not in your favorite, pushes customers away from you instead of pulling you to them towards you or wanting. I think this was, there was a sales trainer, the late Jim Rohn, who talked about the best position that you can find yourself in, is positioning yourself to the customer as an assistant buyer.

You're not there to convince them of anything. You're not there to sell them a bill of goods. Your job is to help understand who they are, what they need, what would be beneficial. You have some subject matter expertise in this problem that they're trying to solve for themselves. And so your job is to be their assistant in making this very important, very valuable decision and finding whatever is best for them. And so as a way of framing in your own mind,

sales kind of has these icky connotations that a lot of particularly new entrepreneurs are very uncomfortable with. When really you can reframe most of that as you are making friends with someone you've never met before, you're trying to understand what would be good for them. And you're trying to help them make a really good decision.

Whatever that good decision happens to be for them. And when you think about sales in that way, it becomes a lot less scary, and it becomes a lot more interesting and a lot more fun. Because it also takes the pressure off of yourself of like, oh, I need to persuade. I need to convince. I need to convince, I need to, you know, be the one who gets someone to do something that they might not want to do.

No, that's not how it works at all. And so there are a lot of different methods that you can use to do this. The two best, you know, we talked about value-based selling, like really understanding what the customer wants or needs. And then there's a kind of a close technique. It's not exactly the same thing, but there are similarities called education-based selling where it's, you are helping the customer become a better customer of the thing that you sell.

And so there's a quote by a lady, her name is Kathy Sierra, that I just love. And paraphrasing a relatively long quote, she says, don't sell better cameras, help your customers become better photographers, because when they become better photographers, they're going to want better cameras. And so just helping people understand more

about what it is that you do, it encourages them to want more. And when they want more, they're pulling from you instead of you pushing on them. Now, there are a lot of, call it structural barriers to making a sale. The classic objections, like, I don't have enough money. I don't know if this is worth it.

I don't know if it'll work. There's a special case. I don't know if it'll work for me. So I see that this is a good thing. I've seen this work for other people. I believe that, but I'm a special case. I'm the one, to which the common market does not apply. And the best thing about those kinds of objections, you know it advanced, they're coming.

They're always going to be coming. They apply to everything. And so that combination of the mindset shift of, I'm an assistant buyer, I'm going to try to help them make the best decision that I can. And being a prepared seller, knowing well in advance the types of questions that a customer is going to ask, doing your research, having answers to those things before the sales conversation actually takes place, that puts you in the best position to make the final sale.

Let's play a game because this got my wheels spinning in a cool activity that we could do. Let's pick a product, and I'll say some objections, and you can counteract my objections about that specific product. So you pick the product. Let me see what, let's do the camera thing since we brought that up earlier. OK, so camera.

Josh, I think the camera is too expensive. Well, it's a really a question of what you value, right? Like, so if, let's, let's say hypothetically, if you own the camera, what would be the kinds of things that you use the camera for? For shooting YouTube videos. Shooting YouTube videos. Oh, interesting. Okay. And you're using your YouTube videos for what exactly help me understand what that looks like. To promote my podcast. Okay, interesting. So, so if I'm understanding you correctly, maybe the video features of a camera are more important to you than capturing still images. Am I understanding that right? Yes. Okay. So there are a couple of different kinds of cameras

that we can look at here. And there's this whole class that are essentially optimized for still images. Those don't apply to you. So we're just gonna ignore all of those. It's not what you're looking for. There are a bunch of different cameras now that come with an integrated video feature that will help you, for example, make sure that you're always in focus.

And so, you know, everybody will be able to see your eyes and your face clearly. It will blur out the exposure. So how much light is entering the camera, making sure that you look really great and then there's nothing weird going on with the image. There are certain kinds of cameras that we can make sure hook up directly to your computer. And so whether you want to shoot video on the go or you're in your office and you want to shoot video for your YouTube channel there. And so based on all, do those sound like things that would be helpful in using this camera to do what you want to do. Oh, yeah, for sure. Okay. So based on those features, here are three different

options. Camera A, camera B, and camera C. And we could have this conversation over a longer period of time to understand the trade-offs between these features. Like maybe hooking up to a computer is would be a really handy thing to do because you always shoot video in your office. You don't shoot it anywhere else. And so I could confidently recommend camera C to you because based on how you're going to use the camera, this has the best balance of features for what you wanna use it for, and this is the price of that.

So basically you're leading with value, right? What did you unpack, what you just did there? You were leading with value, did you do anything else? Value comparison maybe? Yeah, so what I, this is an example of something called qualification, which is when you have a new customer, not every customer you talk to is going to be a good customer, and not all of them are going to be a good fit for whatever it is that you have to offer.

And so my first question is like, how are you going to use this is a qualification question. Like what is the kind, like you're saying that you want a camera, but there are lots of different cameras that do lots of different things. So if, for example, you were an art student and you're going to be shooting architecture images in black and white and you need the most crazy detail, like that's a completely different ballpark of camera. And so by asking a few questions up front, you can really narrow down like, okay, is this a good customer, is this a customer I can help?

What is the thing that they would find most helpful? And then of that, I can ask some additional questions to get more information to kind of triangulate what potential solutions might be. So why didn't you jump to discounting? Like why didn't you just give me a discount? What's the problem with giving a discount? Yeah, I think discounts are sometimes a useful tool and sometimes very dangerous. And more dangerous from a strategic standpoint, less so from an individual transaction standpoint.

When you think about it, discounts just eliminate your margin or reduce your margin to a certain extent. And so sometimes there's a certain amount of value that's added by the urgency of an expiring discount. Like, okay, there's a special sale going on. You need to make a decision within the next day or so, or an opportunity is gone. That can be useful. But unless you understand exactly what it is that the customer wants to buy and why they want to buy, you're not in a position to talk about even price yet because the customer doesn't have

as much confidence in your suggestion, what it is that you're trying to get them to do. So by collecting more information from the customer, what is the thing that's going to help them the most? You're getting that information and you can use that to guide the conversation in a productive direction. But think about it from the customer's perspective. conversation in a productive direction. But think about it from the customer's perspective. You're exhibiting a lot of interest in them, in their problem, what it is they're trying to do, what's important, what's not. And so when you have that conversation towards the end of it, the customer feels very well heard, understood, valued. And so instead of just like, oh, you need a camera, you should buy this because it's $20,000

and I would make my bonus this month if I were able to sell it. It becomes much more from the customer's perspective. Like, no, this person knows a lot about what they're talking about and I trust that because they have the information, they're guiding me in a direction that's going to be good for me. And then is there ever a situation where we should lead with a less expensive product

or offering to kind of get a customer in the door or get that name brand under our list of logos that we have? Like is there ever like a case for getting a cheaper customer in the door? Yes. Okay. So there are two broad situations where this is valuable. The first is called a loss leader. And so that's, you know, the selling an offer at a loss at the beginning, because you know, over the lifetime of your relationship with that customer, they're going to buy a lot from you. And so you can see this a lot of times where memberships are becoming much more of a market trend.

And very often, it would be like, the first purchase that you make from us, we're gonna give you 20% off to make that purchase, or 15% off, or whatever it is. The reason that makes sense is because once you're a customer, you're highly likely when you have this need again, you're going to come back and purchase from them over and over again. And so the loss leader establishing a relationship that then you can sell to them over a longer

period of time, excellent reason to use discounting. The other thing that you can do, and this is much more on the relationship end. This is called a damaging admission. And so sometimes it's in the context of like, okay, this is something that's not super great about the product, and I want to tell you about that upfront, so you know about it. Sometimes in the context of sales, this is saying, okay, going back to our camera conversation, there are three different cameras that fit the things that you're looking for. of sales, this is saying, okay, you know, going back to our camera conversation,

there are three different cameras that fit the things that you're looking for. And A is $5,000, B is $10,000, and C is $15,000. The natural expectation for most customers is like, oh yeah, they're gonna try to sell me on the $15,000 one. for most customers is like, oh yeah, they're going to try to sell me on the $15,000 one. And so you can sometimes gain a lot of trust with a new customer in particular

by saying, no, you should buy the $5,000 one because it does everything that you need. The value is much better. And all of the other cool features that the other more expensive ones have, super overkill for you. You don't need it. Don't worry about it. This is the one that you want. And so that like admission against interest, you know, the subverting the expectation of, I'm going to try to sell, take you for the, as much money as I possibly can, you don't have to play that game. And that's where you really establish a good reputation of really looking out for your customer's best interests. Thanks for listening to Part 1 of my episode with Josh on Young and Profiting Podcast.

I obviously loved speaking with him so much considering we stayed on for almost two hours. My favorite takeaway from this conversation was Josh was his advice around testing a new business idea and determining if there's a real opportunity for potential success. It's super important to figure these things out early and to feel fast before you suck up a lot of time and invest in a bad idea, so I'm so happy we covered that and if you're considering launching a new business, I highly recommend you go get his book, The Personal MBA. It is such a great guide for business people.

If you enjoyed this episode with Josh and want more, go check out our next episode, part two or episode number one, oh seven, where we talk about how to acquire any new skill in just 20 hours. It seems unbelievable, but it's not. Here's a clip from that episode. It's an interesting question, right? Like, if you want to become the best in the world of something or like, you know, in the top 0.001% of a particular scale, what does it take to get there? Interesting question.

Like, you want to be a professional athlete? How much are you gonna need to practice? Like, angling to our conversation earlier about status, that feels like really, really interesting and cool to think practice, like, and going to our conversation earlier about status, that feels like really, really interesting and cool to think about, right? Like how much of my life would I have to invest in some thing to be like an Olympic gold medalist or, you know, things like that?

And so most of the research and most of the conversation around skill was all about that question. Like, what does it take to get to mastery? How do you become the best in the world? And I realized at a certain point, like, that's not the question. That's not the question for most of us. The question is, if we want to learn how to do something that we're not able to do right

now, we're not talking about mastery at all. We're talking about competence. We're talking about going from nothing to like doing something. We're not competing against the world. We're competing against ourselves in our previous lack of ability. Again, go ahead and listen to number 107. If you loved this conversation with Josh

and wanna catch the full conversation with him. And as always, I'm going to end this episode by shouting out a recent Apple Podcast review. Apple Podcast reviews are the best way to support me and my team. If you don't listen on Apple, write us a review or comment on your favorite platform, CastBox, YouTube, wherever you listen, that's totally fine. This episode shout out goes to... SackoolAS 86. Can't stop listening.

I'm generally not a podcast person and I'm super picky about what podcasts I listen to. I first listened to because my husband's best friend from college was a guest on the podcast. I had no plans to listen further, but she did such a great job on the interview that I poke through the past episodes and end up being hooked. I admire how well-prepared Hala is for every guess. How she curates her questions and leads the conversation, she gets incredible value out of her interviews with a short time frame and asks the questions I would want to ask.

I also like that she engages in the conversation and doesn't just fire off a question and then moves on to the next one. The back and forth is so much more enjoyable and relatable. Not a complaint, per se, but the content feels very geared towards entrepreneurs, which I'm not at all. So there's a lot of episodes that I haven't listened to yet because they seem very tailored to someone who wants to launch a side hustle, grow a business, and so on. But the ones I've listened to have been very inspiring and has had such valuable content that I'm sticking with five stars.

Keep up the great work, Hala. Thank you so much for this feedback, and I always appreciate feedback whether it's positive or negative. And I'm a new entrepreneur, a brand new entrepreneur as of a month ago. I spent almost 10 years in a corporate job. So I'll always try to make sure that my content

is relatable to everyone, those advancing in their career, or those wanting to be an entrepreneur. I will make sure that my content resonates with both, to everyone, those advancing in their career, or those wanting to be an entrepreneur. I will make sure that my content resonates with both, and honestly, even if it's an episode on entrepreneurship or launching a side hustle, I really do encourage everyone to learn about that kind of stuff, because at some point you may want to launch a business and you don't want to start from ground zero. So even if it's not on your horizon in the near future, I would encourage everyone

who wants to be a better, more well-rounded person to get to know about businesses and how to start a new business. It will help you in your career, even if it's indirectly. So I encourage everyone to listen to you all of our content, because I think it's relatable to everyone, no matter if you're in a job or if you're an entrepreneur. I think we can all gain from this content and take things that we can apply in our day-to-day life, no matter where we're at. And for all of you guys listening out there, take a few moments to write us an Apple Podcast review, just like, so call us, 86 did, and maybe I'll be shouting you out next week if you do so.

And I love to see you guys share YAP on social media. You can find me on Instagram, at YAP with Hala or LinkedIn. Just search for my name, it's Hala Taha. You can't miss me on LinkedIn. And now one clubhouse, follow the young and profiting club, and find me at Hala Taha. I host live events there almost every day. And as always, big thanks to the YAHP team.

This is Hala, signing off. Are you looking for ways to be happier, healthier, more productive, and more creative? I'm Gretchen Rubin, the number one best-selling author of the Happiness Project. And every week, we share ideas and practical solutions on the Happier with Gretchen Rubin podcast. My co-host and Happiness Guinea Pig is my sister Elizabeth Kraft. That's me, Elizabeth Kraft, a TV writer and producer in Hollywood. Join us as we explore fresh insights from cutting-edge science, ancient wisdom, pop culture,

and our own experiences about cultivating happiness and good habits. Every week we offer a try this at home tip you can use to boost your happiness without spending a lot of time, energy, or money. Suggestions such as, follow the one-minute rule. Choose a one-word theme for the year or design your summer. We also feature segments like Know Yourself better where we discuss questions like are you an over buyer or an under buyer? Morning person or night person, abundance lever or simplicity lever, and every episode includes a happiness hack, a quick easy shortcut to more happy. Listen and follow the podcast happier with Gretchen Ruben.

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