0:00:02 - Corey Quinn
Hey everybody, welcome. today I'm joined by Jonathan Stark. Welcome, jonathan.
0:00:08 - Jonathan Stark
Hey, good to see you, nice to be here.
0:00:11 - Corey Quinn
Super excited about our conversation today. Would you mind introducing yourself to those folks who may not be familiar with you and your background?
0:00:18 - Jonathan Stark
Sure, my name is Jonathan Stark. I'm from Lovely Providence, rhode Island, and I am a former software developer who is now on a mission to rid the world of hourly billing.
0:00:27 - Corey Quinn
Beautiful Yeah.
0:00:29 - Jonathan Stark
I could go on and on, but that's the thumbnail.
0:00:34 - Corey Quinn
So you and I know each other. I'm in your community ditching hourly And I'm sorry, Ditcherville, I think, is the official name.
0:00:42 - Jonathan Stark
Welcome to Ditcherville, yes.
0:00:45 - Corey Quinn
And I'm a student of yours. I've learned a lot from you over the years And I'm really excited to bring you on the show because I think you have a wealth of experience and knowledge in the area, in areas that a lot of the listening audience are really potentially interested in and can definitely benefit from, and one of those areas is the sort of domain of positioning, which is a topic that I'm personally very passionate about, and one of the things that you do is you help you primarily work with soloists today. Is that fair?
0:01:19 - Jonathan Stark
But yes, primarily.
0:01:20 - Corey Quinn
Okay, and what is a soloist? just for context.
0:01:23 - Jonathan Stark
Yeah, it's someone who really is the only employee of a one person business. So they probably have a lawyer, an accountant or a bookkeeper or something like that, but they probably don't have certainly W2 employees or lots of them. Generally, i work with people who were freelancers or were very successful for some reason and became more of a consultant type And they don't really have a lot of overhead. They decided not to scale by hiring, which isn't to say that the things I talk about don't apply to other types of business models, but certainly those are the kinds of folks who I mostly work with.
0:02:03 - Corey Quinn
And I think what's super interesting about this conversation we're about to have is that a lot of the principles and the concepts that you teach directly to soloists actually apply pretty directly to the similar or the same audience that is listening to this show. So it's kind of a crossover a little bit, And I'm super interested to hear your thoughts on these things. So, when it comes to positioning and one of the things you help the soloists do is to position themselves as the sort of the go to person in their space what are some of the principles that you teach when it comes to that effort?
0:02:43 - Jonathan Stark
So much, let's start here. You want to be the one and only. Either you know if it's just you or if it's a small firm. if you're in any kind of service business, you want to be the one and only. You don't want to be just one of many, because if you're just one of many, what that means is that your potential clients see you as basically the same or interchangeable with other shops or individuals that do the same thing. So if there's, there's basically no meaningful difference between you and the next person, so you're automatically going to have a hard time raising your fees or having profitable being profitable, because there's always someone who's going to undercut you and the client. If they can't tell the difference between A and B, they're probably going to pick the cheaper one, so why wouldn't they be silly not to? So there needs to be some difference between you and the next hundred agencies or freelancers or consultants.
So you really need to stand out from the crowd, and that's not a. It's almost like an evolutionary imperative to do the opposite to fit in, to not stand out, because you don't want a saber-toothed tiger to grab you, right? But that's not. That's not the world we live in anymore, and so standing out is it's for some reason. it's very scary And a lot of people don't want to do it. They want to kind of copy things that are air quotes, proven, like a proven model, like this is what the other, this is what IDO is doing. Let's copy them And then you're just, you're just going to lose, and you know, i see it over and over.
0:04:14 - Corey Quinn
What are some of the characteristics of a positioning that is sort of unique and that's helpful and for a soloist or even an agency to be differentiated and to kind of be unique like what does that look like in the market?
0:04:29 - Jonathan Stark
Yeah. So when I first started teaching people about positioning I was I was sort of really thorough about it And I used this kind of statement called a laser focused positioning statement that consists of it's two sentences that consist of four key points for variables. It's like I am a discipline who helps target market with expensive problem and, unlike my competitors, unique difference. And over the years of teaching that to people I've found that it's incredibly hard to to answer all of those out of the gate when you're used to being a generalist. So I've sort of made kind of 8020 rule, made like easier ways to do it to get started eventually build up to that. But what can you do in the meantime to kind of like work your way up to it. So an easier version of it would be you know, i do X for Y, so I do digital marketing for dentists, or I do digital marketing for, or I do software development for Fortune 50 or whatever it is. It's. It's a. It's not great but it's a start And and what you're doing is you're you're continuing to be a generalist in your skills. You still I do this thing. I'm a lawyer, i'm a chiropractor, whatever. I'm a tattoo artist, but you're doing it for a particular group of people you know, vertical perhaps, but it could be any. However you segment your audience. It could be billionaires, it could be, it could be some psychographic, like perfectionists. Whatever it is. You do this, you do this thing that you do. You would take this skill that you have and you apply it, and for a particular type of audience for whom you can deliver certain kinds of benefits that are attractive. So that's an easier way to do it And you can think of it as I always describe it, as, like an etch, a sketch, where you have the sort of two ways to specialize.
You can specialize in what you do. You know your skills. You can say I've got all. I've got 100 skills, i'm good at all of them. I'm going to specialize in only doing one or two of those. So you could sort of dial the etch, a sketch, way over to the right and just specialize and take a couple of your skills And really those are the only things you talk about.
I just do performance optimization for my SQL databases that have more than a billion records. It's like super specific thing a software developer could do. On the other end, they could be like a full stack web developer. They do back end, they do front end, they ops, devops, they do test driven development. They million things right. So you're super generalist. That would be if you dial way over to the left on the horizontal So you can specialize in your skills. You can be more general or more specialized in your skills, and then the up and down knob, the vertical knob, literally the vertical knob would be who you help.
So what of these things that you do? who do you help with them? Is it businesses? Is it people? Is it companies? Super vague, or is it something hyper specific, like personal injury lawyers or you know whatever you, you name the thing. Or, like I said before, it could be psychographic, like perfectionists or, or I don't know liberals or whatever, conservatives. It could be anything. But you can get more and more or less specialized on each one of these axes and dial yourself into a place where no one is, so you can dial yourself into some white space and become meaningfully different to those people. So then you could, in theory, charge more premium rates. You could race to the top instead of racing to the bottom with your fees.
0:08:04 - Corey Quinn
I think a lot of businesses who are potentially journalists today and understand this concept in theory, look at this and they may say well, you know, if I specialize, then I'm going to be cutting off a ton of my opportunity. And why would I do something like that? How do you respond to that?
0:08:22 - Jonathan Stark
Yeah, the metaphor that everyone uses is like Oh, you know why cast? Why just fish with one hook when I could cast a wide net? And I'm like that's not the right metaphor. You don't have a net. Starbucks has a net, nike has a net, apple has a net. You only have one fishing pole, that's it.
So would you rather be in the ocean Or would you rather be standing next to a barrel full of fish? You know the ocean has something like 3.5 trillion fish in it, but good luck finding them in your little dingy, right? So if you've got a thousand trout in a barrel next to you, would you rather be fishing around in the ocean or fishing in the barrel? The fish in the barrel are going to be jumping out, you know. So it's like and then once you, once you, because you don't need 1% or even 100% of 3.5 billion customers you only probably need. You know, in your first year as a soloist, you probably can't even handle 10. So you know why are you fishing in this vast space when you could just pick a place where there's demand? already? these fish want to be in your boat. Why?
0:09:30 - Corey Quinn
not just go to them and Serve their needs.
0:09:33 - Jonathan Stark
You know, bait the hook with something that you know these particular kind of fish like and are gonna come after. Yeah, it's, it's the opposite It creates more opportunity yeah and What?
0:09:46 - Corey Quinn
let's say that I'm a digital marketing agency and I'm listening to this and saying, okay, so on the sort of the horizontal dial, i'm gonna focus in on, let's say, seo as a service. Potentially, that's way to narrow it down and instead of SEO for anyone, i'm gonna focus on SEO for roofers. As an example, what happens when there's already a couple folks in that space already doing the same thing? How else? how else? what are different ways to kind of continue to differentiate?
0:10:19 - Jonathan Stark
Yeah, it's interesting because in that the laser focus positioning statement I mentioned earlier a Lot of people can kind of do their discipline. They kind of know what they are And there's maybe one or two ways they'd say it, but they know what they do. They probably the the target market They have a hard time with, but it's not impossible. The expensive problem They have a hard time with, but it's not impossible. But the unique difference They're always stumped, and The reason they're always stumped is because they don't even know who their competitors are. So how could they possibly say how they're different? So if you're in a situation where there's already a what did you say? SEO for roofers, for roofers, then I would look at those other competitors and I would say look, all right, how am I different? maybe I'm, i don't know, maybe I'm a sort of iconoclastic, tattoo leather type of person, maybe it's just a personality thing, maybe it's a business model thing, maybe the other three of them all Price in a particular way an hourly rate or percentage of spend or something like that and you just do it in a completely different way.
I talked to someone recently who does websites for power washers and He has a drastically Novel. It's just like I never heard of it before. He has this novel business model where He doesn't charge them upfront at all. It's like immediately a subscription. It's he calls it a payment plan, but it's immediately a subscription. So he goes out to these power washers. He's like for 180 bucks a month You will have a website as quickly as 30 days. And they're like 180 bucks a month. That sounds great. And so he takes a risk on the front end Because he's got to build an entire website in a month for $180. But it's it's a two-year contract and At over the course of time they pay him out enough so that he feels like he's making good money, and then they can extend, you know, for sort of hosting and maintenance after that. Or they can stop paying him and he just gives them like I think it's WordPress or something. He just gives them the files and they can host it themselves, which no one ever does.
Of course so drastically different business model. He's definitely not the only person making websites, and he's definitely not the only person making websites for sort of home service businesses. He's probably not even the only person making websites for power washers, but I'll bet you he is the only one that charges $180 a month and Like with no no. I mean there's a commitment but there's no down payment, there's no deposit, there's no setup fee.
0:12:57 - Corey Quinn
Yeah, easy to buy.
0:12:59 - Jonathan Stark
It's super easy to buy.
0:13:00 - Corey Quinn
Yeah, i Recently saw a study from HubSpot that says that those companies that study their competitors have a 2.5 Times higher ROI in their marketing, compared to businesses who don't study their competitors.
0:13:16 - Jonathan Stark
I believe that, but I also would caution people from paying too much attention to their competitors, the thing that I I think it's It's sort of obvious to say, but I think it's more important to pay attention to your customers. But the overlap there, i think, is paying attention to what your customers think of your competitors, who your customers even think your competitors are, because they might not even be aware of Who the people eat youth see as your competitors. They might see something that it's completely not what you do. As an alternative, yeah, you know, like wicks, like I'll just do it myself on wicks, like that might be your air quotes competitor, but it doesn't. It doesn't surprise me that that's true, and I should add, just to jump back for two seconds, Yeah the guy with the $180 sites.
He's onboarding more than one new paying customer per day. Hey right, like those are fish jumping out of the barrel into this guy's. But he's doing, he's crushing it And he has. It's not just him, he has a team of people now.
0:14:15 - Corey Quinn
But sure you mentioned this concept of an expensive problem as a Way to focus your positioning. Can you talk about what a an expensive problem is?
0:14:27 - Jonathan Stark
Yes, an expensive problem is it's a situation where someone will write you a big fat check to make their life better. So this is this is especially a big deal When I was doing consulting my previous life, when I was doing sort of big ticket consulting for fortune 500s, when mobile was a big deal you would want, you wanted someone who Had a really high desire so they've got this painful pain. You wanted them to have really high buying power and You wanted there to be no obvious alternatives to hiring you so you could. You have this, like you know, a Very powerful upward lift on your fees. So, like they really want I don't know They really want their website to be mobile friendly. They've got a million dollar budget to do it and you're the one that wrote the book.
So here, take my money right, so you want awesome right Now There's a difference between an Expensive problem and a big problem.
Okay so, like global warming, is a very big problem, but it's too diffuse. There's not one person who's losing sleep over it or could write you a big fat check to solve it. So it needs to be, it needs to be a business problem. It could be caused by global warming, it, you know it. That could be a root cause or contributing factor, but that's that's not. That's more of a mission that you know. If I want to do what I can to, you know, decrease climate change or slow climate change, that's fine for a mission. But You got to find an expensive problem where a business is experiencing this big pain That they have not been able to fix. It's urgent that they do. They're either. You know they're losing, you know, tens of thousand dollars a day.
I talked to somebody once who They had a really, really bad Invoicing. Probably their whole, the whole system for their business was just spreadsheets. It was a massive Excel spreadsheets with a bunch of calculation fields and there were multiple. It wasn't even in the cloud, it was just multiple copies of this file. They were moving around and it was always wrong. People are always overwriting other people's changes, putting it on a shared drive, and So what? I'm looking for an expensive problem.
I ask questions like well, how big a deal is this? Why don't you, why don't you just do this, why don't you just do that? and I'll suggest like really simple, cheap solutions. And We tried that. Nobody stuck with it.
You know, we thought about using Google sheets and everybody's access in the same one, but nobody would use it and they just kept going back to the old thing and and like, well, how, how big a deal is this really? I mean, could you just Hire an extra person to like really focus on being being the one that owns the spreadsheet and checks it out like a librarian? and And he wasn't like. He was like I don't think so. We've tried that before. And I was like, well, how big a deal is it? and he said that they were losing they, they were so slow, their process was so slow that they were getting invoices out so late That their clients were not obligated to pay them because they were so old. And I was like, does that hop happened very much? and he was like we're probably losing forty thousand dollars a month in invoices that just expire. And so I, yeah, so I hear that as a budget.
So you know, that's at least four hundred thousand dollars easy right, never mind all of the Ajita and the scrambling and the chaos, right? so that's at least a five hundred thousand, four five hundred thousand dollar value in a given year. So if I can create some kind of a software solution for fifty grand or even even 250 grand, they're gonna throw money at. It's like why not, why wouldn't they do it? and then the list of reasons Becomes very small and they're not related to money. They're like we don't either. You're not credible. They don't think they'll stick to it. They think they'll pay me and I'll do it. And then still they want to adopt it. There's other reasons why they might say no at that point. They might find someone cheaper is another one. But generally speaking, you know that is an expensive problem. That's a fairly expensive problem.
0:18:35 - Corey Quinn
Is in your mind. Is there a correlation between an expensive problem and the requirement to work with a specialist?
0:18:42 - Jonathan Stark
I Think they wouldn't have the problem if it didn't require a specialist really. So if it's someone who's willing to write a check to solve a problem, that's like a personality type almost, but it's like you know the what's the what's the The quote like the best tool in your toolbox is a checkbook, you know as a business owner. So If they're already the type that would write a check to solve the problem, then they've probably written a lot of checks already to try and solve the problem and it just hasn't worked.
So then they sort of have educated themselves that we cannot get this ball across the finish line on our own. All these other things we tried didn't work, so we need to call in the big guns, or something like that. Yeah, so then they go. They go asking around Who is the one You know, who wrote the book on this? who's you know?
0:19:28 - Corey Quinn
you probably the person who speaks at conferences about it, has been speaking At conferences, the one who has delivered these kinds of results to other big companies like mine, those sorts of things and as Excuse me and as an agency owner or a listener Who's running a business, maybe a generalist today and wants to begin the process of specializing and And and focusing there their positioning around an expensive problem, how do you advise they actually find what the expensive problem is for their audience?
0:20:01 - Jonathan Stark
Yeah, that's. You almost have to pick and Like a market.
Let's just call it a verticals, because that's the show we're on but, you almost have to pick a vertical and Because different verticals They might have the same underlying root cause like they might all have soggy positioning, you know your target market might all have soggy positioning. Your target mark, these different target markets might all be overwhelmed by digital But they're gonna talk about it in different ways. They're gonna use different lingo to discuss Their their version of the symptoms of the root cause. So By picking a particular Vertical you can start to find out how they talk about the symptoms of the problem that you solve and How painful they are. So For someone who you know It's a comedy, it's more than just a vertical. So the word vertical generally means, you know, like the NAICS code or however You say that it's like a particular you know whatever software consulting or Landscaping, right, it's, it's like a job kind of.
But I think a good target market has even more than that. You call it your ideal customer profile or whatever's a million names for it. But there's usually almost always, when I've got a student who really, really nails positioning and by nails it, how do you know they nailed it? Well, they're getting tons of leads that look like that and There's almost always a business-sized component where, where They need to be big enough so they can afford your exorbitant fees and the expense. The problem is expensive. They will write a big fat check to solve this problem. So they need to be big enough to have that buying power, but not so big that they've got one of you as a CMO or a CFO. You know, like like they've hired internally They have an entire team of people like you. So if they're huge, it can be, it can be tricky, it's not impossible. But so so the, the, if you pick a few target markets, you can talk about this, how to do that better than I can Usually. I just say you know, look for places where you're already an insider. Yeah, the power washer guy was an insider and other people I know were insiders in their market. They know all the people there already have a reputation. I was an insider in software development when I went solo and did coaching for those sorts of folks. So I know all the language.
But the other thing is the, the symptom and the, the buying power, are going to be different depending on the size of the company. So once you focus in on, say, cpas, you're probably also going to say CPAs who don't have any partners who do run their own firm, who have a handful of employees but not 100. And they're doing, between you know, 750,000 to 1.5 million and they want to get to 3 million. So that's like a perfect customer profile for someone. And if you get that specific, you can start to read their minds, because you talk to a few of me, have conversations with them and it's like how do they articulate? How do they articulate the symptoms, the painful symptoms that they're experiencing?
And you might talk to someone like that and be like, well, you've got your positioning is terrible. Like you know, it's the same problem that most small businesses have anyway, but they're going to talk about it in a different way. And their expensive problem just to keep going with this example their expensive problem is not really that they they want more money. I mean, yeah, that would be nice, but the real problem they have is that they're working weekends every week And what they really want is their time back without losing money. And then, once they get there, then we can talk about growth or something like that.
But in a different market or a different psychographic, someone who is maybe way more ambitious could be the same CPA, could be the same size firm But they don't have kids, they don't care about the weekends or they're an empty nester And they are perfectly fine grinding seven days a week. They're going to have a different. They might still have the same problem like soggy positioning, but they want a different thing. So it's the same root cause, but the thing that they will write a big fat check for is different. They want to double revenue instead of get their weekends back.
0:24:26 - Corey Quinn
It manifests itself differently.
0:24:28 - Jonathan Stark
Right, yeah, the desire is different.
0:24:32 - Corey Quinn
Changing subject a little bit. In this new world that we live in, previous to when we hit record, we were talking about the power of AI and its ability for to generate content, and you know many agencies today in any business is really subject to this sort of what does this actually mean for businesses? but in the context of agencies who have built their positioning in their brand around the execution aspects of digital marketing, let's say like, for instance, blog post writing or website generation, there's, there's, you know the list goes on, and but the point is is that they primarily position themselves as a doer. You know they're, they're a, you know they functionally very sophisticated and that's, you know, that's their positioning, is their function. You know they're an expert in execution. As AI sort of begins to proliferate in this, in this world that we live in, how do they begin to transition their positioning from a doer to an advisor where they can be paid instead of for the execution, but more for their expertise and their and their strategy?
0:25:43 - Jonathan Stark
Hmm, a lot going on there. So the first thing I would say is there's, as globalization proliferated over the past 20 years I feel like now in remote work has become a relatively normal thing like this commoditization of execution has been going on anyway. Yes, it is just probably taking a quantum leap. So the first thing I would say is don't resist it, embrace it. But that means that your business model might need to change, because if your cost structure, if everyone's cost structure, collapses, so now you can do create the same amount of output as you used to in half the time, in a fifth of the time, and you are charging hourly let's say probably most of your audiences, but let's just say hourly, or some other time based version of that day, rates or something charging on inputs then you're probably going to have to adjust your business model, you know, to something that's either either for deliverables, you know, per deliverable, but now you can create the deliverables like, like twice as fast, so great. Maybe you could even lower your cost and still make more money. I don't know, but it's. it's. if you think of AI as like a bunch of interns, what would you do if, like, there was suddenly a flood of a billion free interns in the market. you know that, that we're working for your competitors. So I would say I would say, embrace it, figure out how to use it to create leverage, which could include changing your product and service mix. It could include a business model tweak probably not, i think, for your, i think for folks listening. it probably won't be a full business model tweak, but it might be changing your mix of products and services And you know, if you don't do what your competitors are going to do, someone's going to figure it out.
You know I saw a tweet that I saw two tweets on this that really resonated with me. One was software developer who was who's very experienced, very well known, like like million followers type of software developer And he was like I've been resisting looking at chat GPT. I finally got over my reluctance and and I now I know why I was reluctant 90% of my skills just went to zero value, but the remaining 10%, 1000 X. So in the other tweet was I think the other was something to the effect of I think I think chat GPT and generate AI will allow for the first billion dollar solo business, which I was like that I could see that. So it's going to affect everything for sure, to larger or smaller degree.
in the digital space, anything that's digital is going to be affected. So embrace it, get used to it, find ways to create leverage with it. But okay, then to the final question. the final piece of your question was about being become becoming known as more of a doer, less of a doer and more of a thinker, or I know, how to do So you, your agency, you, or your agency has sort of institutional knowledge.
You are, you have a reputation for delivering a certain kind of results And you can sell those results. You don't have to do, you know, like if it made sense to hire a bunch of employees and mark up their time and make a living based on that arbitrage. That might be over, but that's okay, you can just price differently. So it's the results that the clients want, it's not the blog posts.
They don't want the blog posts. They want better SEO. And why do they want better SEO? They want more money. They want, like, lower customer acquisition cost, whatever it is.
So use these new tools to deliver the outcomes that your buyers want and stop talking about the inputs. So stop talking about Oh, we'll do this many blog posts. I mean, you could still do that and then just write them very cheaply with with chat, GPT or something. But I feel like if you do want to make that transition to sort of a higher level business partner, you need to start thinking about and charging for the results, And then that will that will cause you to think differently about how you engage with your clients.
Most likely, you'll think, Okay, we're not going to be just a room full of hands that crank out social media posts and graphics and blog posts and content marketing and all that. We still might do that, But that's not what we're going to price. What we're going to price as a result and get really good at actually delivering results. And if you can do that and make that claim credibly and testimonials to the effect that you can do it, that's a pretty big moat, you know that's going to be hard for other people to compete with.
0:30:42 - Corey Quinn
Yeah, what are productized services?
0:30:47 - Jonathan Stark
Oh, a productized service is a fixed scope service sold at a published price. That, generally speaking. Sometimes they're really. You know they're like $50,000 or $100,000 for productized service. I might not post the price then you might need to have a sales call for that. Yeah, but usually they're.
You know it's some kind of service that you could deliver, you know, from five to 15 hours across the course of two to four weeks. you know, spread out And and it's more or less. You run through this process. That's. Of course, it's always a little bit different with each client, but you're not customizing it for the client, you just do the thing and you just do the thing. You package it like a product, hence the name Product High Service. It's delivered like a service but it's sold like a product.
So, and this is actually really good, if you're having a hard time positioning your whole firm, you can create a Product High Service and just position that. What is the value proposition of just this one? you know, digital road mapping service or something, digital strategy, engagement, what is the? even a workshop would be a Product High Service. It's like it's fixed scope. At the end you can promise these kinds of benefits. Your team will understand X, y and Z and that, will you know, probably lead to benefits down the road. If you believe that's true, then this is a good deal. So, yeah, it's just it's like a bottle of pills, you know, got a migraine, quick relief, that sort of thing.
0:32:16 - Corey Quinn
And so in the agency space, have you seen any companies do this well with regard to sort of packaging up their I guess their service based product?
0:32:28 - Jonathan Stark
Sure, i mean the power washing guy is an example. I mean he also threw in the sort of subscription model which is, i mean, a whole, probably a whole other conversation Very interesting to add in to actually have a good subscription model. I feel like Storybrand is an example, like the Storybrand team complete. I mean, I don't know, i don't think anyone there started out as an agency but they could have. You know, don Miller might have been doing consulting one-on-one he probably did at some point and you know but that's not what they're doing now. They're packaging it up and teaching people how to do it instead of being the ones that do it. Yeah, so you can. You could package up your expertise, your know-how in a lot of different ways. This is, this is a big decision for somebody who's used to, you know, selling.
0:33:20 - Corey Quinn
Customized.
0:33:21 - Jonathan Stark
Yeah, exactly, but it's. it's a move Like you could move from this high touch service end of the spectrum and sort of down. you know we're a small number of clients, small number of big clients, into productized space. We have 10 times more clients but you're just doing this repeatable process for them into even smaller, where you've got a hundred or a thousand times more. You wouldn't even have clients at this point to be called customers and they're buying input products and training and that sort of thing.
So you know that's a. That's a big business decision strategically where you want to go with your business. You certainly could just stay at the high end deliver promising and delivering outstanding business results to a small number of clients every year And as the clients get bigger. If you're using value pricing to price your projects, you can be dramatically increasing your fees over and over and over. The bigger your clients get and the more expensive the problems get.
0:34:20 - Corey Quinn
Yeah, yeah, we'll get into value pricing here in a minute, but you know what are like. You know, for the agencies that are primarily doing customized services Every client's new there's a whole discovery and covering and a whole sort of roadmap that's specific to the customer, and then the execution. Everything is bespoke, let's say on the one end of the spectrum, which has its benefits and its drawbacks. Why, you know, what are the benefits for considering doing more, more of a product or introducing a productized service. Why would they, why would that potentially be a good idea for them to think about?
0:34:57 - Jonathan Stark
Yeah, so when you have one of those completely everything's new every time we have, maybe you have a kind of a process you go through, but it's just constantly winging it and and that you know, and you maybe you enjoy that sugar high of learning some somebody's new business every time and like, oh, last month it was a plastics manufacturer, this month it's a plastic surgeon, you know, and it's fun because they get to learn all the new things and it feels really creative and and that's great, but you're not building anything, you're just getting paid to do the thing and there's nothing, there's no business there.
0:35:33 - Corey Quinn
Yeah, you're selling your time effectively. You have your team's time.
0:35:36 - Jonathan Stark
Right. So if if you're not pricing yourself like through the roof, like massively profitable, you're really not building anything. You can be massively profitable doing that People do it.
But. But most people are probably not value pricing, So they're probably not massively profitable and doing that stuff. So the question becomes like do I ever want to sell this business? Or even if you don't want to sell the business and you think you never will, wouldn't? I want to have the kind of business that someone would want to buy. It's a sign that that, if someone wanted to buy your business, it's a sign that you have a good business. Yes, Nobody wants to buy a bespoke services company.
0:36:15 - Corey Quinn
It's just not no, it's just not. What are you buying? Especially if, yeah, the founder leaves, then then you're basically yeah, what are you buying? Nothing, right, you're not buying anything.
0:36:26 - Jonathan Stark
So but if you have, if you do want to become like an expert, you can. It's like impossible to become an expert that way You can be. You can do your best practices all day long in the custom world And sometimes it'll work and sometimes it won't. You just it's tough. If you want repeatable success, you want systems, you want cost reduction, you want all of these sort of you want to feel like we want it to feel more like an engine and less like a constant brainstorming session. Yeah Then then. Productized services is a great thing to step into, to start to experiment with a lot.
Some people think like, oh, that I'll just I'll get bored doing the same thing over and over. And it's like well, you know, get a hobby, this is your business. Wouldn't you want to have predictable income? Like, wouldn't that be great? Wouldn't it be great to know what your costs are going to be every month? Wouldn't it be great to know that you? you know, like the power washing guy onboarding more than one new customer a day for years, wouldn't that be nice? He's building the same website over and over and over. Is he bored? I don't think so. He doesn't seem bored. I mean, he's doing six figures a month, you know, with a small team.
0:37:46 - Corey Quinn
So it's like and I imagine if you do the same thing over and over you you probably get pretty good operationally efficient from an efficiency perspective to your point, but the actual end product probably also is better.
0:37:58 - Jonathan Stark
Yes.
0:37:59 - Corey Quinn
If you're creating, excuse me, a variety of different disconnected web type of websites for different people.
0:38:06 - Jonathan Stark
Yeah, i feel. I feel like in the creative space there's this tension between between being a designer and being an artist and everybody wants to be an artist but they're not artists, they're designers. So it's like if you want to be an artist, that's cool. I was a musician, i have a degree in music, i get that world. There's create but there's creativity in building a business, but it's not. I don't buy the artist thing. I don't buy the artist thing. If you want to make art, make art.
If you're a designer, you're solving problems. Designer is super creative, has to be super creative and has to. But but the point is you're getting paid to solve problems. So that creativity is in service of creating business outcomes. And the more repeatable your processes, the more predictable it is, the better you're going to be able, better you're going to be at solving those problems and delivering beneficial results. It's it goes back. It does go back to like the focusing in on a particular kind of buyer, though also because different buy. You know, product I service is not going to be a perfect fit, price wise and everything else, for a mom and pop and for dominoes. So you do part of having the product I service work is that you're incredibly specific about who's the appropriate buyer for it and an inappropriate buyer. You wouldn't let them buy. It be like this isn't a good fit for you.
We should do a custom project.
0:39:33 - Corey Quinn
It seems like the process is get really clear on who you're focusing on and what you're doing for them. Do it for them for a while. Begin to recognize patterns in the work that you're doing. Try, you know. Look at it from a productization perspective like what could we package up, put a price on it and merchandise that individually from our custom services as a way to bring more people in?
0:39:56 - Jonathan Stark
Yeah, i mean I don't. I don't know why you wouldn't want to experiment with that. At least it doesn't mean changing the whole business. You could try a product I service. See how it goes. There's a great book on this, called built to sell by John Warlow, where he sort of like it's sort of fictionalized account we're, you know, written like a parable almost of a design agency that specializes and creates a repeatable product, that service. And like, all of a sudden there's something that you could sell And, like I said before, even if you don't want to sell, Being able to sell means your business. You've created something. You've built something.
0:40:32 - Corey Quinn
Yeah, i like the same. Build a.
0:40:34 - Jonathan Stark
Build a business that everyone wants to buy but that you don't want to sell right, right, as soon as it It's, soon as it becomes super attractive, it's like the last time you want to sell it. You're like, well, it's running like a while oiled machine, right.
0:40:45 - Corey Quinn
Why would I give this away? This is, this is a great asset that I'm barely working Yeah exactly So it's it's. It's fair to say, then, that taking a vertical approach To your sort of your, your business, will help put you in a good position to uncover potentially very powerful product I service that can help you to Eventually sell if you want to yeah, I think that's the easiest way.
0:41:10 - Jonathan Stark
There are other ways, but they're hard and risky. Harder and riskier, i think I think picking You know my, my business strategies like help people you like, get what they want, and if you can do that over and over, you're gonna be fine, right. So at the key piece, there is people you like. Like, who are the people that you want to hang around with? because Most service businesses, you're gonna be exposed to your clients as much as your family, so wouldn't you know if you were? There's a difference between, like, hanging around with the Countess and hanging around with artists. Like, who do you want to hang around with? They both have demands, they both have needs, they have different buying power. So you, you create your product, i service, or maybe even products, in a way that was affordable and a good value for whoever your target is.
But yeah, picking who you want to help Is hard. Like, people don't want to do it, they resist it. If only there was a book that described the process. But yeah, hmm, but yeah, but it's. It's not easy, but in terms of building your overall business, it's an exercise. That's difficult, but in terms of your overall business, that is putting yourself on easy mode. It's like yeah, it's, you're just Stacking the cards in your favor. If you just pick who you want to sell to, even for just a year, you know it doesn't have to be forever. You can, yeah, do a new vertical after.
0:42:35 - Corey Quinn
I've I've interviewed a lot of very successful agency owners who've taken a verticalized approach and one sort of thread that sort of ties them all together and this is true from my experience at Scorpion and other places I've worked is that To your point, that there is sort of a requirement that the founder or the business owner, that the person who is basically running the show, really has to have some kind of intrinsic care for or interest like in the in that target audience? So an example may be H HVAC businesses And the, the owner of the agency, cristiano. He really likes working with blue collar folks.
Right, there's another, another gentleman who has a, an agency that focuses in on sort of medical, multi-location medical practices, alex Bambrio, and He really cares about, you know, being a part of the solution when it comes to health care and he believes that that's a that's, you know, part of the work That he's doing is he's helping to, you know, with that mission. And so there's there's definitely, when you do focus down, you do you definitely spend a lot of time with them and there needs to be sort of that inherent Interest or respect or a care for that, that that business vertical And I think by doing that it helps you to really amplify the results that you're able to create.
0:44:04 - Jonathan Stark
I mean, think about it It were everybody listening is in a service business. If you don't want to serve, then open a laundromat like you, it's fine. Do something else like you don't have to be a Service provider. But if you're going to be in that kind of business, what you just described actually carrying It's a competitive advantage. You know, if you're, if you, if you're in the mindset of like, oh, i just want to be a sort of pure entrepreneur, that's cool too. If you just want to be a pure entrepreneur and just invest in More or less random businesses that you think are gonna work, that's fine, that's a path.
But that's not what anyone listening to this is doing. I don't think. I mean, did anybody listening? Did? isn't thinking of themselves as the primary investor in this firm that they're running? I doubt it. I doubt they are. Yeah. So if that's the case, then well, wouldn't it be nice if you actually cared about your, your clients, transformations and like improving their well-being, you know, and, and then acted like it? I think everyone will give lip service to that, but then actually acted like it, yeah, in the product and service mix that you create for them?
0:45:15 - Corey Quinn
I think that there's a correlation there between the folks who give lip service to it. They'd burn out, they. They decide something else, you know, in six months because they're not cynical. Yeah, it's, and then those folks who actually make it across that, that chasm, if you will, are the ones that that are doing it For the greater purpose right, it's funny session.
0:45:34 - Jonathan Stark
Oh, go ahead.
0:45:35 - Corey Quinn
Oh no, i was just gonna say you reminded me back when that was After college. I moved back home and I worked at a restaurant as a host and I really didn't want to be there. Now, it's really not a good host like I just didn't want to be there, right? I just didn't want to do my job. Yeah, right, right.
0:45:54 - Jonathan Stark
Yeah, Yeah it's.
You there's gonna be a phase. I mean, people might have already gone through this phase, people might be some folks listening might be past This phase. But there's a phase when you first start where Where the profitability is like a lagging indicator that you're doing something right, so something has to carry you through. Or if you did a pivot, if you're listening to this and you're like they're right, i'm gonna pivot, i'm gonna start doing product eye services or something. Any Decision that you make in a business is a bet that it's gonna work out eventually. And then you need to be excited up. There needs to be some motivation That will get you through that phase before the profit profitability kicks in.
Yeah, Yeah so you got it. So caring is one of the things that can get you through the phase a sense of fulfillment that That this is gonna help people's lives get better. Then if you, if these are the kind of people whose lives you want to improve, Yeah then that can help carry you through that. That. Let that lag time.
0:46:56 - Corey Quinn
Sure, i mean, it takes a lot of energy to build momentum And it's through those periods where care can really help to your point. Yeah, make that transition successful. One of the the the things you talk a lot about in Ditcherville and in all of your, your Teachings and your writings is this concept of value-based pricing. And I want to kind of dive in a little bit there because, think some of the the listening audience are going to be agencies who maybe are doing project work, creative kind of larger, more sophisticated website design or other type of creative work that they're potentially charging on a time of materials basis or maybe a blended hourly rate and Sort of. I'd love to hear your thoughts on you know what, You know why. Why is it a better strategy to sort of ditch hourly or or to move away from purely hourly based Pricing and moving into value-based pricing? So what is first off, what is Value-based pricing? to kind of kick it off, kick it off.
0:47:59 - Jonathan Stark
Yeah, there's kind of two ways to answer that. The way you phrase the question gives me two ways.
0:48:04 - Corey Quinn
Levels. To answer the first one is it's.
0:48:07 - Jonathan Stark
It's a way to scale Without adding headcount. So if you think that the only way that you can scale your business is to add headcount higher, higher, higher, higher, higher, that is a way to scale, but it's not the only way, but it's the only way that most people think of. And If you are a great leader and you really want to be a great leader, you want to be a great boss, you care about your employees Well-being and you want them to grow, then you're probably going to be good at it. That's probably a good move for you. But if you're someone who is really doesn't want to be a manager They're just doing it because that's how you grow and that's the only way they know of Then you're probably not going to be a good boss. And then you have all the attendant problems with that, like employee churn, low morale, revolving door policy, spending a ton of money, onboarding new people Have always having open positions, restaffing projects constantly at all those nightmares.
So So, on one level, value pricing is a way to scale a service business without hiring. So that's pretty interesting. So the first question I guess I would ask myself is Did I hire employees merely to scale the business up Or do I actually care about improving my employees lives too? Like maybe you're you know, i don't know you're hiring a Group of. I've talked to a few people who sort of hire You know ex cons and people who hard scrabble background and they really you know, and the goal is to make their lives better, along with the owner's life, and is that's, that's a whole mission thing. That's great, i love that. But if you're just hiring employees to scale up and make more money, there are other ways to do that. Value pricing is a great way to do it If you already are attracting clients that are wanting you to do these big custom projects.
0:50:00 - Corey Quinn
So why? why? why would you just charge more per hour instead of a value base?
0:50:05 - Jonathan Stark
eventually you'll, just because the problem with hourly is that It gives people and apples to apples comparison with Your competitors. So if everybody's charging hourly, then they'll be like well you know, why are you $300 an hour Instead of 150 like everyone else? and that's it's tough to explain, you know. You could say, well, we're twice as fast, but then like, why are you even? Like, if you are actually twice as fast, why not just give them a price? and then all of that, the speed, becomes an asset for you.
0:50:42 - Corey Quinn
So that you have volume. Yeah.
0:50:44 - Jonathan Stark
I Mean yeah, double my prices, i lose half my customers. So you can scale up the hourly model with headcount. But I just don't like when people are hiring employees just to scale so Value the way value pricing works. This is sort of the second way to answer the question. Is that for a custom project that it's going to be bespoke to this prospect who came through the door and They are like they're like We need this crazy thing. We don't know how to do it. We barely even understand like we don't know what we don't know. You have a sales conversation with them and if you're attracting The kind of clients who have expensive problems, you can go through a series of questions to uncover their real motivation for even talking to you or someone like you in the first place.
Like something changed. Something changed either Somebody came into their market They're afraid of losing market share to Amazon or a competitor Like a some other competitor is taking their, their business eating their lunch, or there's AI is now working And they don't know how to capitalize on it. They something changed And they want an expert who looks like you to help them go with this project that they have. So when you meet with them initially, i just have people try and talk them out of doing the project and saying, like, all right, why not not do this? This sounds like a really big deal. It's going to be disruptive to your whole organization, it's going to cost you a fortune. Why not not do it? Isn't there some other thing you could do instead? And then you have them explain to you why no, this is the thing we need to do. You're like, oh okay, it seems like a good reason.
0:52:29 - Corey Quinn
Then you find out they're, they're, they're pitching you effectively. Yeah, you know we need. We need to do this and we think you're the person to do it.
0:52:36 - Jonathan Stark
Yeah. And so you come in and you kind of act like you would if, if you're a board member and they're trying to convince you to, to allow them to spend all this money on this big thing. So you just kind of act like they're their parent or their board member or something. Even if you're talking to the CEO and they're like we need you to do this thing, it's like, well, why convince me? And then it's like is now? does it have to have to be now or could we put it off? You know you want it.
The more urgent it is, the more important it is that they do this than the better it is from a value pricing perspective. And then, finally, why would you hire someone expensive like me to do it, when you could get interns or use AI or get your cousin Vinny or outsource this to emerging economies? Why not just do it cheaper? And if you can get credible answers to all those questions, you can put together a proposal based on what it's worth to this particular client. And let's say it's worth, like my invoicing example earlier, that was definitely worth a half a million dollars, like no question.
0:53:35 - Corey Quinn
Exactly.
0:53:36 - Jonathan Stark
Exactly Right. It's, and you know it couldn't be clear. It's not always that clear, but it was. It's very clear. Often, and you know, you come up with some prices based on the value fraction, a fraction of the value And you're like all right, what could we do to move this particular needle for this client in this circumstance? for you know, let's say it's $500,000, is the value, guesstimate value? You say, what can we do for these people for $50,000? that would move the needle. What can we do for $120,000? that would move the needle. What can we do for $250,000? that would move the needle.
And you kind of give yourself a budget and then think about the scope last, after you have prices. So like, all right, for 50 grand, we could do a kickoff meeting, we could do this that give a couple of designers, you know, for two week period And then at the end they'll have I don't know roadmap or some kind of whatever you know, some kind of thing that will your contribution will contribute I mean, your activities will contribute to their desired outcome In a way that they believe because that's what they explained to you in the conversation Like, you know, why do you need SEO? Why not not do this Right And they'll say, well, because this, that and the other, and it will lead to you know, we know, we know our funnel is great, but we're just not getting enough traffic to the site. As if we could just get qualified traffic to the site, we would double our income. Oh good, okay, write that down.
And there are probably at least three different ways that you could engage with the client to improve their SEO. And at those different budgets you just pick. You just pick a scope for the budget that you'd be fist pumpingly happy to do. So when it inevitably is more work than you thought because that's always what happens you still don't care because you have like a hundred percent margin, or like you're making double what you would have done it for. So even if it takes you like 75% more work, you don't feel like you're losing money.
0:55:30 - Corey Quinn
So I imagine that in many contexts, the agency owner that's listening is used to having a competitive situation when they're trying to win a deal in generally speaking. In other words, the buyer is potentially talking to them, as well as two or three of their other competitors, and they're sort of trying to compare and contrast the different services and the offerings. What would have to be true for the buyer to choose the partner, the vendor who has a value based pricing versus, let's say, time of materials?
0:56:10 - Jonathan Stark
The whole premise indicates that your positioning isn't great yet. It's like you're not the one and only, so you're not specialized enough, or at least you're not perceived as specialized enough. I mean, the biggest deal is that no one was considering anyone else. They might be aware that there are other people out there, but they're not even considering them. You are the one and only. If you want the best, this is the person. that's the best. This is how much it costs, and if that's not cool, that's fine, go with someone else. So you need to be so okay, but let's just say that is your situation. Your positioning is not crushing it yet and you're not the one and only. Maybe you're one of three and the other ones are. you need to differentiate yourself.
So one thing that works, in the software space at least, is that you can point to the pricing model as a benefit. So you could say I've said this in the past in software context, where most people charge by the hour, and I would say well, all right. they come to me and say you know, we really want to work with you, but your price is literally double. the next quote And I'd say well, is it a quote or is it an estimate. And they say, well, it's an estimate. I'd say, well, mine is a fixed price. Like you, with me, you won't pay up any more than that price on the piece of paper.
0:57:35 - Corey Quinn
That's interesting.
0:57:36 - Jonathan Stark
If you go back to them and they're willing to stand behind their prices, then you should go with that next one. But if they won't stand behind their prices, you need to ask yourself are they really? do they really know what they're doing? Like if they're not even comfortable with the price. So you can point essentially what you're doing is you're making it conscious the risk that the client is taking if they go with someone who just is a blank check. Basically, you know, if you want to give these guys a blank check, go for it, but with me, you know how much it's going to be. Would you rather have the certainty? Would you rather not?
0:58:12 - Corey Quinn
Yeah, so what is potentially downside to taking a value based approach to pricing projects?
0:58:20 - Jonathan Stark
Pricing it too low and getting killed. So if you're really bad at establishing value, most people are pretty bad at it. It takes practice, it takes a lot of practice. So if you're not getting a lot of leads, then it's tough to get enough practice to get better at it. So again, it's comes to a position, anything, a differentiation thing, marketing in general. It's like you want to be getting enough leads so you can get practice doing this kind of a sales interview. When you do go to do it, make the scope as small as possible, make the project as small as possible, which is the opposite of what. even when you're good at it, i try and make the project as small as possible, because that's risk. the bigger it is, the more risky it is.
0:59:01 - Corey Quinn
I fall into that trap. by the way, I try to make it too big.
0:59:04 - Jonathan Stark
Yeah, a lot of people want that's the normal way. It's like you go in, you pitch all of this stuff, you're going to be on the clock or you're going to be on this monthly retainer thing and you want it to last for as long as possible because you don't want to have to have another one of these conversations with a new client in six months or in two months. So you want to milk the client as long as possible. That's what it is. So, all right, great, not that you're not helping them, but you know what I mean. You're trying to avoid sales conversations.
You don't want to give a solid price, because you know well again, i'm speaking for software developers. I don't know about your people, but in the software space the financial incentives are set up such that you will underestimate to get the gig and then when it goes over budget or over estimate, you go. Well, i told you it was an estimate, but they had to make a purchasing decision based on that number, so they consider it as a price, even if in flashing red letters you have it say this is only an estimate. My estimates usually go over by double. You know, nobody reads it like that.
1:00:06 - Corey Quinn
They can't make that decision.
1:00:09 - Jonathan Stark
That's a stat.
1:00:09 - Corey Quinn
as a matter of fact, something like 50% of projects go 100% over budget, or 80% is crazy Yeah, which doesn't help the dynamic of the relationship between the agency and the client, because the client now has to deal with these additional costs and the agency has to defend them.
1:00:32 - Jonathan Stark
Yeah, finger pointing, micromanaging, waiting about hours, Your buyer, your buyer getting. I've had buyers get fired over this, Like their bosses, like you are. this is projects out of control. You're out of here.
1:00:47 - Corey Quinn
There is so much more to unpack here, but we're unfortunately running low on time, so we'll have to continue the conversation another time, but I have a couple of quick questions. Tell us a little bit about the work you do, jonathan. Tell us about Ditcherville and how people can learn more from you and get in touch with you.
1:01:09 - Jonathan Stark
Sure, i appreciate that. I mean, the best place to go is like jonathanstarkcom There's a bunch of links right in the homepage. But Ditcherville is really interesting to me. It's a community of five or 600 people who are mostly soloists, but some small boutique firm owner types, and every other week we do this sort of live Q&A session over video And then in between calls people share their wins and share their questions. And hey, could you give me a tear down on this webpage And when I'm in there and I do that stuff.
But it's really a place for these sort of independent entrepreneurs to get to hang out and get advice from each other and see what worked for you, what worked for you. Because I've got my experience, but that's just my experience And I've coached people, but that's still only I don't know 50. I probably've only had 50 one-on-one coaching clients, maybe more, but about 50. It's not 100. So I don't know everything. But the group, the sort of conventional wisdom of a group of like-minded people who are trying to increase their profitability, trying to without working more. They want to make more without working more. So it's a very specific kind of mentality and usually without hiring. So, yeah, so that's honestly I don't know how to describe it very well. I'm realizing No, no.
1:02:40 - Corey Quinn
I'll share from my experience. I'm a member of the community and I think the things that I value from it are number one. So thinking from a value-based perspective it requires at least I'll speak for myself requires me to rewire how I think. In some respects That makes sense, and so being a part of a community who are also committed to building their business around a value-based pricing as well as positioning, as well as product type, services, everything we discussed today it's a community of people who realize that that is a I'll speak with my bias it's a better way to build a business, and so that's sort of the common bond, and there's a really high level of quality of folks in there who are truly doing the work, which I appreciate, and so I get a lot out of it.
1:03:29 - Jonathan Stark
Cool, yeah, that does make sense because it's a huge mindset shift. So, if you can, get support from people who are working air quotes in public, then it does seem really beneficial.
1:03:38 - Corey Quinn
Yeah, last question, jonathan What's your motivation?
1:03:42 - Jonathan Stark
I want to rid the world of hourly billing.
1:03:44 - Corey Quinn
I hate it. I love it.
1:03:46 - Jonathan Stark
I hate it I think it's going to be on my headstone. That would be a win. It's so bad. It's so bad for clients, It's so bad for buyers and sellers. It's just lazy, but it's like water to fish, Like you just. That's just how you do it right? You just bill by the hour.
1:04:05 - Corey Quinn
I think. I think the listeners who run their business that way know it intrinsically. When they hear you say that, they're like, yeah, you're right, But you know, but what? So what do I do? And I think-.
1:04:16 - Jonathan Stark
What do I do instead?
1:04:17 - Corey Quinn
Right, and so I think the value-based discussion I think is definitely worth exploring. So if you aren't already familiar with Jonathan, or aren't his email list, i highly recommend it. I'm on it. I get a ton of value from that. And just to confirm, your website is-.
1:04:34 - Jonathan Stark
JonathanStarkcom.
1:04:36 - Corey Quinn
Beautiful. Thank you so much, Jonathan. I appreciate you coming on the show.
1:04:40 - Jonathan Stark
Anytime, my pleasure. Thanks for having me. Thanks for having me.
Transcribed by https://podium.page
