The Personal MBA: The Foundation of Effective Business

Lesson 7 of 14

Sales: Turn Prospects into Paying Customers

 

The Personal MBA: The Foundation of Effective Business

Lesson 7 of 14

Sales: Turn Prospects into Paying Customers

 

Lesson Info

Sales: Turn Prospects into Paying Customers

We've created something super valuable we've attracted the attention from of people who are likely to be to be into whatever it is that we're doing now we get to the magical part of the business where people actually give you money for this wonderful thing that you've created, right? So the sales process is the process of turning prospect of customers, people who are into what you're doing, one more information into a paying customer. Right now, the defining moment of the sales process is the transaction, the medical point in time where there's an exchange of value between two or more parties, I want what you have you want what I have let's trade, and we're both better off for having traded right? The transaction is the defining moment that makes a business of business. If you don't have transactions, you don't have a business and the sales process, the transaction is the on ly point in time, where money or resources are actually flowing into the business instead of out of it right whe...

n you're creating value your spending money when you are marketing your spending money when you're delivering value your spending money, when you're analyzing your finances, your spending money, you're spending a lot of money, right? Sales is the only time were resource is flow into your business, so it's particularly important. And the goal, as we were talking about earlier in in the minimum viable offer idea the goal is to go from I'd qualified idea, too, the point of a transaction, somebody giving you money for this thing that you made as quickly as possible, and if you've already been offering something for sale for a long period of time, increasing the number of transactions and the amount of those transactions and the frequency of those transactions, to make sure you're selling as much as you possibly can, okay, prerequisite to a transaction being made is the idea of trust. So if the the other party that you're dealing with doesn't trust your ability to deliver the benefits that you're promising them, guess what they're not going to buy from you, right? So there's a certain amount of trust between both parties that has to be present in order for transaction to take place and having a reputation as we talked about earlier, the better your reputation, the more inclined to people are to trust you, the easier it is to complete a transaction. Likewise, uh, if both parties can verify in some way that the other party is trustworthy and capable of actually delivering upon what they promised, the easier it is t make a transaction, so, for example, many large purchases use things like escrow services which is I'm going to sell you something for an enormous amount of money but I want to have a high degree of trust that you actually have the money to pay me before I give this thing to you right? So the buyer just puts the money in the escrow account says see you can see it here is all the money and that escrow account increases the amount of trust between both parties and makes it way more likely that though come to terms and agreed to a transaction make sense so trust is the prerequisite no trust no transaction okay now common ground is also a prerequisite of a transaction and common ground we're getting into you'll notice a little bit of negotiating terms sales is a negotiation process right? I have something you want you have something I want we're going to talk about something that's going to be mutually beneficial for both of us and once we agree we trade we're both better off we're both happy right? So common ground is a state of overlapping interests it's the situation where we both have something we each other want and we're going to agree to trade no common ground no transaction right if I have something but you don't want it we're not going to trade if you are not willing to trade something that I value enough to trade for what I have, we're not going to do it right so common ground aligning the interests of both parties in a way that results in a transaction is the purpose of the sales process right and that's where negotiation comes in right so you can talk about what am I going to give you and what are you going to give me and is that cool for both of us and you can offer more offer less request mohr of the cellar or or negotiate the terms of the deal such that you have a situation where both parties happy whether both happy you have a transaction right now pricing uncertainty principle this is one of my favorite concepts to discuss in sales because it it can kind of blow your mind when you think about it uh the pricing uncertainty principle states that all prices are arbitrary and malleable so you can set any price for anything without limitation whenever you want right so you can go outside to the street pick up a little rock from the road you can say the price of this rock is now one trillion dollars even do that there is nothing preventing you from legitimately setting a price on this rock for one trillion dollars now that doesn't mean that somebody is actually going to pay you a trillion dollars for the rock but that can legitimately be the price you can set your prices to be whatever you want at any time you can change them whenever you want. No limitations there the key is being able to support the price that you're asking right? So you set a price for a trillion dollars for this rock why should somebody pay you a trillion dollars toe have this rock right it's probably not not important enough that it's just yours right? There has to be some good reason why you're asking the price you're asking so a lot of pricing is setting the highest price that you possibly can and supporting that with enough good reasons that people are actually going to be willing to pay the price that you suggest and we do that by educating the prospect about how why we're setting the price we're setting and uh encouraging them tow understand the validity of this price and agree that it is worth that much because remember in general people prefer to pay as little as they possibly can so if you set a high price you have to be prepared to support it. Okay? Now the last idea that we will talk about today is how to support prices and then we will come back to the rest of the concepts in in sales tomorrow then going to value delivery in finance okay, so you set a price you need to have some way of supporting that and there are four different ways that you can support a price now the way that I like to think about this is by looking at houses residential real estate because remember houses don't come with a price tag affixed to them right kind of you have to set the price yourself and you have to be able to support the price before pete somebody's going to be willing to pay it so there are four ways toe to set a price on something the first is called the replacement cost method which answers the question how much would this thing cost to replace right so in the case of a house let's assume a media right streaks down from the sky obliterates the house there's nothing left if right how much would it cost you to build the exact same house right now tally up the the amounts add in a little bit of margin for the folks building house and congratulations you have a supportable price on the value of that structure right that's replacement cost the market comparison method answers the question how much are other things like this selling for right so if you say ok I have this house there's a house two doors over that has the same number of bedrooms in the same number of bathrooms in the same general area in terms of square footage and it's in the same location it's pretty much the same house right that house sold for five hundred thousand dollars therefore this house is worth five hundred thousand dollars because that one is just like this one, right? So using comparable things to triangulate into a price and if a little less square footage, little less bedroom, you know, if there's the little differences, you can adjust the price up or down to compensate right market comparison. The discounted cash flow method net present value method is a financial way of of setting a price to something. And the best way to visualize this is, well, what if you decide not to sell the house? What if you decide to rent it? How much could you get if you rented it right? What are other rentals in the area looking like? And you can use that monthly, uh, monthly cash flow that you're getting from that rental and back into a price for the value of that series of cash flows over a long period of time into a lump sum that you would be paid today. And we're not going to talk about the base. The details of what the actual formula looks like just know that you can take a series of payments and figure out what it's worth right now, if you're interested, go to wikipedia, the whole, uh, equation is up there now. The value comparison method answers the question, whom is this valuable to write? Is there a specific type of person with specific values that may value this thing more highly? So great example let's, say there's. A really small house someplace in tennessee, couple bedrooms, couple bathrooms, nothing, nothing, uh, nothing amazing until you realize that that house used to be owned by elvis presley. Right market comparison method would say, this house is kind of junky and not worth very much two people who really love elvis. This house is now worth millions of dollars, right? Because it's valuable to a certain type of person, right, so off all of the different ways to place a value on a price to support a price. The value comparison method is typically the method that's going to get you the highest supportable price, because if you understand what makes your offer uniquely valuable, you can support the highest possible price. Based on what you know, your prospects and customers really value.

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