How To Craft Pricing Strategies That Explode Profit, and Guarantees Predictable Cashflow

"Johnson, how do we develop pricing strategies that grows revenue, and profit, while maintaining  consistent cashflow?

How do you craft pricing strategies that ACTUALLY maximizes (and explode) your profit?

Some years back, I was asked a question, during a live video show.

It was spontaneous and came from one of the persons in the audience.

What to know what the question is?

"Johnson, I have an option to sell something for a monthly fee of $1,5000 or a one-time fee of $9,000 for 6months block, which one do I go for?"

Think about it for a second, what would you do?

The funny thing is, pricing is overlooked.

Most people just have an idea, the next thing is to sell the product.

As a business owner, it is your job to do these two;

1: Create massive value in your market place

2: Create cashflow.

You’ll live or die (as a business) on your cashflow.

And I mean cashflow with good profit margins, because, if you behave like most other businesses who compete on price, you’ll die on price, it’s that simple.

I have seen two people who started a business the same week, one of them exploded and was making 10times more revenue than the other.

What was responsible?

Profit, and yes, cashflow.

Ok, now, let's get to the question I was asked…

You know, recently, a lot of people have been asking me about MRR (monthly reoccurring revenue) VS product.

So, should you charge a monthly fee of $2,000 for 12months or a one-time block of $24,000 for a year?

No, you may say what if people cancel, it means you’d stop getting your $2,000 every month.

Well, that’s true BUT…

That’s not even an issue because there’s a great solution to that.

BUT, there’s a bigger problem in the room.

See, I like insurance firms.

Most of them are smart, and they know what they’re doing.

They “leverage” borrowed money at zero interest to grow.

How do I mean?

See, you need to be smart as a business person.

There’s a term insurance company often use “float”, for lack of a better description, it means “excess money”.

And it is why they’re winning, and I’m going to show you how to do exactly that.

So, you pay insurance companies $1,000 per month, and in that contract, it will take them atleast 3years before they’re able to pay anything on your behalf.

3years= 36months, and that equals $36,000.

You gave them $36,000 and “secretly,” told them to do anything they like with it.

Ok, let’s do simple math…simple stupid maths.

Just follow along, I suck at maths too, so this one will be dead simple.

Insurance company A:

Their policy says you must pay $1,000 and wait for 36months before they pay anything.

So, you have to wait until it accumulates to $36,000.

So, let's say in their first year, they have a total of 200 clients X $1,000 monthly fees for 12months, that is $2,400,000 in annual re-occurring income but they’ll have to wait for 12months.

So, in 3years, they’ll have $7,200,000

Great guys, clap for them.

Nothing bad with that, right?

Insurance company B:

Look, we’d give you a discount, instead of paying us $12,000 in 12months, get our annual package with $1,500 off.

So, each client will pay $10,500 cash, because we are giving them a bait to pay us in full.

If we have 150 clients, that would be $1,570,000

But this insurance company has this money as cash.

And they’re getting it in full from first month.

So, insurance company B has $1,570,000 and decides to invest it in a venture that brings back $8 per month.

So, every month, they’ll be getting $125,600

$125,600 X 11 months, that’d give them $1,381,600

Now, add $1,570,000 to $1,381,600

BUT in 3years, insurance company B would have

$8,854,800

That’s cool $1,654,800.

Who is smarter?

Mind you, Insurance company B is serving lesser clients, that means Insurance company A is paying more fees for fulfilling obligation to their clients.

BUT, wait, there’s even more interesting angle to it.

I’m sharing one BIG secret with you…

And honestly, I’m not supposed to be sharing this for free, but I’ll.

I promise to give you premium stuff, for free.

What I’m going to share now is very simple, and looks very easy BUT…

Don’t be fooled, it is extremely powerful.

BUT let this sink in…

Pricing is everything.

One of our clients “demolished” his competitor recently.

While his competitors were charging $2,000 per month, they opted for 3 installment payment of $8,000.

So, their client pays them $2,000 every month, let’s assume they’re good and the client stays for 12months.

That’s cool $24,000, right?

Cool!

On month one, they collected $2,000.

Month two, they collected $4,000

In month three, they collected $6,000.

Guess what my client did?

Since they are charging 3 installments of $8,000…

Month one, $8,000.

Month two, $16,000

Month three, $24,000.

How cool is that?

I told you that your pricing structure is everything, right?

Wait a minute, we’re just getting started…

Since our clients have us, and we can run their ads, and they get 5X, what happens next?

They’ll finish their competitor who is doing $2,000 monthly.

First, the difference between both of them in month 3 is $18,000, right?

So, my client quickly decides to invest the $18,000 into advertising, since they will be getting a 5X return.

That is cool, $90,000.

So, minus the $18,000 from the $90,000.

That’s cool $72,000 in profit.

Within 90days.

So, we immediately reinvest the $72,000 for another 5X return on our ad spend.

So, that’s $360,000

Then, we re-invest that $360,000 into ad, that is $1,800,000

How crazy is that?

Mind you, all of this is happening within a 12months period.

Have you ever heard about 2 businesses that took of the same day, one is hitting millions, and the other is barely surviving?

This is the reason.

The problem with Monthly reoccurring revenue (or MRR) is not customer churn, the problem is, cash collected, and how you multiply the cash you have on your hand.

Look at clickfunnel for example, do you know what grew them rapidly to a $100 million?

It is not a monthly subscription.

It is the yearly offers they made.

They’re a bootstrapped company.

Why do you think big companies like salesforce does annual billing?

Why do companies like Calendly give discounts for annual subscriptions?

The reason is far beyond having the customer to stay, it is about getting that free money, and also, quickly multiplying that free money.

Your job is to try to “control” or “multiply” the cash you have in your business because you live or die on cash flow.

Create cash, multiply it.

The most valuable companies are those that are able to provide more value to their market because they are not running out of cash.

Listen, the cashflow thing is a big issue for businesses, if you understand this simple maths we just did, you’ll never ever run out of cash to fund your vision.

And once investors see this blueprint, they’re happy to invest without you asking them to.

So, what do you currently sell, and how are you creating profit, and multiplying your cash?