Friday, February 24, 2023
Value-Add vs. Discount Entrepreneurship Lessons
October 18, 2022 Newsletter.
FIVE BULLET SUMMARY
(If you’re thinking ‘too long, didn’t read’ - TLDR - read these bullets plus the key takeaways below)
- I’m a value add investor in real estate and always have been but haven’t always maximized the value add opportunity on properties I’ve personally owned
- My business mindset has been to discount my services, time and products
- Self-managing is a mistake I’ve made since I get connected to the individuals and allow my empathy to reduce my pricing where professional management in both business and real estate allows me to focus on adding value and ensure the proper pricing is in place
- I’m pivoting my business to never discount another product again and instead push additional value for the firm price I charge and would encourage this mindset for any new or upcoming mid-life entrepreneur
- Learning how to craft an offer allows you to not fight on price and actually charge more than your competitors for the same product or service (see below for a case study)
BEFORE YOU CONTINUE: Screenshot the key takeaway that landed for you and tag me in a story on Instagram so I can see what’s working for you.
FULL VERSION
The term ‘value-add’ is popular in real estate investing and has been my core strategy. In business, however, I’ve taken a ‘discount’ route. The learnings I share in this week’s newsletter is the directional shift in my business and how quitting your job is much easier tactically when you’re focused on maximizing your pricing. I hope the example I use below blows your mind!
VALUE ADD IN REAL ESTATE
The buildings I have purchased in my short investing career all have one thing in common. They are poorly managed typically with deferred maintenance and below market rents. As such, they can be purchased at a discount compared to the market. I’ve personally purchased 2 distressed duplexes and 2 distressed apartment buildings and am now a general partner (and limited partner) in 8 apartment buildings with Quantum Capital.
When I managed my own portfolio, I got to know the residents. Their stories, their worries, their concerns. I’ve been a community focused person first and business second so I’ve been slow to push market rents with existing tenants. Part of this is fear. What if they vacate and I can’t replace them quickly? Vacancy is costly - which is true - but also something I relied upon to justify discounting rents for existing tenants.
When I put professional management in place, everything changed. I had a layer between me and the residents which is good. It allows me to focus on what I’m great at, which is ensuring the product is as good as it can be without having to be the guy to charge the market. Even then, when something came up and there was dissatisfaction, my default was ‘send them a $100 gift card’.
We recently bumped renewal leases in one building to market rent for a one bedroom of $1045 from $750 for 4 tenants that were coming up. Two renewed (which I didn’t expect either to). The other 2 declined and said they’ll be moving out BUT they’re still in the building renting at market rents on a month-to-month basis. There just isn’t a better option for them. The empath in me feels for them, but the budding entrepreneur and businessman is learning first hand the laws of supply and demand.
As a quick aside - none of the above lessons are from Quantum deals - I stepped into a well oiled, value driven, professionally managed machine when I became a partner.
DISCOUNT IN BUSINESS
The ‘send them a gift card’ mentality has transferred into my business owner mindset. ‘Being Jamie Gruber’ is the business I’m in now. The value Jamie Gruber offers is aligned with my life’s purpose to ‘inspire and motivate others to live their best life possible’. The subject most aligned is becoming a mid-life entrepreneur (hence this newsletter) and the products include Emerge and Ascend, coaching at times, and hosting masterminds like the one I’m doing in the Dominican Republic in January.
Jamie Gruber adds value. I logically know that. But when I talk about marketing Emerge, the first thought is ‘what coupon code can I offer’. When I launched the Dominican Mastermind and set the pricing at $6500 for a single room and $4500 for a shared room I immediately went to ‘am I charging too much’?
To date, I’ve been the guy self-managing these interactions and relationships. I have to state the price to the buyer. I hear people’s stories. I listen to their concerns and the empath takes over. I default to how I can make this cheaper for them and I discount my impact, my time, my effort, my intent … my value!
What’s worse is I silently build resentment. I’ll be honest with you since I’ve committed to this in the newsletter. When I get asked ‘is there a coupon code’ or ‘what discount are you offering’, I immediately react internally with ‘go fuck yourself’. If you’re reading this and you’ve asked me those questions, please don’t cringe. I don’t remember who has or when they have - I just know it bothers me AND that it’s a me problem. I’ve set the expectation that I’m available at a discount.
VALUE ADD VS. DISCOUNT - A CASE STUDY
My team and I have sold our last Emerge course for the rest of 2022 and we sold it at $995. We’re rebranding/relaunching Emerge and Ascend as one community in 2023 called ‘Emerge Supercharged’ and I’m VERY excited about it. Taking the lessons from going to market rent and how supply vs. demand drive value, I’ve set the clear expectation with my team that we are no longer a discount organization - we’re value add. Never again will I offer a coupon code, a discount, a haircut for what we do.
What has worked best for me in real estate and in business is increasing the value of the offer instead of reducing the price. When I’ve stumbled upon doing this, it’s a better experience for the customer, I feel more engaged and dialed in to delivering, and it weeds out the tire kickers and folks that SAY they want more but are price conscious and value blind. (I sound bitter - I don’t think I am though 🤔)
If you’re thinking about the side hustle to start, how to monetize your brand, or do anything you can to build yourself to your W2 exit, here’s a hypothetical case study.
Let’s say you’re going to open an Amazon store and sell baking equipment. Your top product is a non-stick cupcake pan. It’s high quality and runs $25 based on your research. But the problem is there are dozens if not hundreds of other stores offering the same product. The typical strategy (and what I’ve done) is battle on price. When you do that, you get into a war to the floor thinning out your profit margins and making it truly not worth your time!
Instead, you can sell that same $25 pan for $50 - here’s how:
- Niche down - so let’s just say you’re going to market to vegans who love baked goods
- Create a package offer with low/no cost but valuable add-ons
Anyone can buy a $25 pan. But if I market to vegans I’m narrowing my audience and now can devise an offer that is specific to that sub-market. Develop a PDF with the top vegan organic sweeteners on the market for under $10. Add in your favorite tested and simple to make 3 vegan cupcake recipes. And then send an exclusive interview with a top vegan baker from YouTube who shares his/her ‘3 secrets to making sure your vegan cupcake doesn’t taste vegan’.
Can you see how you could charge $50 for a high value product? It’s the same $25 product that your competitors are marking down to $19.99 and all it’ll cost you is an email automation to ensure you fulfill the promise of delivering the valuable bonuses you promised to your niched down audience.
I have added in business acquisition trainings from my high-ticket mastermind Ascend to increase the offer of Emerge and people get value from that and don’t ask for a discount. Value add is my model from here on out!!
KEY TAKEAWAYS
#1: Don’t Accept Being Paid Less
If you’re reading this and have a job, imagine if your boss came to you and said ‘Hey, you do a great job and I love what you do. Thank you for the value you provide! Is there a way we can keep this amazing stuff you’re doing but pay you less?’ That’s a ridiculous question but it’s a repackaged way of asking someone for a discount or coupon code. Take the emotion out of the fact that someone asked (taking my own advice on that) because it’s not an unfair question. If someone else is willing to drop the price, then good thing you asked! But in your move from employee to entrepreneur, add value rather than discounting your work.
#2: Hire Professional Management
Taking another lesson from real estate, I have a team now. My responsibility and communication is with them, and they are the ones to interact and set the pricing with the end consumer. Again, this allows me to deliver on what I’m great at - helping people get unstuck from their current situation and live their BEST fucking life!!! Virtual Assistants offer a very low cost option and is something I’d encourage anyone that has a W2 income to explore and onboard now vs. later.
#3: Find your “Passion Pairing”
Sometimes it can be hard to take in all of this information and imagine how you would create the side hustle or business to start you mid-life entrepreneur journey. To simplify, identify something you LOVE DOING with something you LOVE TALKING ABOUT. I call this your passion pairing. If you love to teach and have a passion for bicycling, or if you love to research and geek out on wine, or maybe you’re a tried and true networker and love cars. When you choose that passion pairing and take one single step toward it the path to a business will reveal itself. The who’s and the how’s become clear. Trust me!
#4: Pricing is 99% Mindset
If you’ve already created a business or own real estate, then you can probably relate to this. How much you charge in rent or for your product or service is less about the market or the value and more about your mindset. If you suffer from imposter syndrome (guilty) then your attitude toward pricing will reflect that. If you’re overly prideful, same thing. And neither is good. Underpricing and devaluing your time is just as bad as overpricing and not selling anything. The number one hack to nailing this is surrounding yourself with others that can call this out and more importantly can see the true value you offer. My operations leaders have been screaming at me to stop discounting services and the core message is ‘you have to believe you’re worth it - because we do’.
QUICK HITS
Tribe of Millionaires Podcast Episode
✯ Check out episode 227 with Keala Kanae. He talks about starting and scaling a business. I loved everything about his message.
Something Funny I Saw
Mark Normand on Instagram is hilarious to me. He does these call outs to the audience to give him a topic - like a juke box - and then gives his take. Check him out!
This Annoys Me
✯ Pizza has certain principles to be pizza. It must come from a place that ends in a vowel, it must fold, flop and drip grease down the middle, and lastly it must have something that people from the midwest don’t have in their pizza. It’s a key ingredient that seems to be lacking in any pizza outside of the northeast extended to MAYBE Baltimore. That ingredient .. is taste! The cardboard squares with ketchup on it that places like Jets or other wannabe ‘pizza’ places provides meet NONE of the criteria above. And anyone that thinks that meat pie called ‘Chicago style’ is pizza can simply unsubscribe. I feel better.
Lesson from Living Abroad
✯ I saw 4 dudes in a car with their hands holding a stack of plywood to the roof - nothing else tying it down. They lack resources here but are incredibly resourceful. Makes me realize how resource rich we are in the US and Canada which can diminish our ability to be resourceful. Combining the two makes you unstoppable!!
If you’d like to work with me and/or be part of my communities
✯ Join Emerge for our next launch you can get it for only $1495 (use code JAMIE for $500 off!!)
✯ If you’re a net worth millionaire, apply here to join Gobundance and my team will schedule a time for us to talk. It’s $10,000-$15,000 annually to be a member - the greatest investment you can make in your future!
Talk to you next week
- Jamie
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