We spent summers on the Jersey Shore when I was a kid, in Ocean City. About a block from our house was a little store, called Lazaleri's. It was a mom and pop shop. The Lazaleri's had a deli, and sold a few groceries and penny candy, back in the day. When I was 6 years old, I bought a bag full of candy and took it back to our house. My mom helped me set up a card table in the front yard. I sold that penny candy...for 2 pennies.
And that's when I figured out how business works. You buy something or you create something and you sell it for more than it costs. You manufacture your own money.
Why I do what I do is to make money. Money buys options. More options equals more freedom. If you charge more than it cost for something you create profit, and you make your own money.
How incredibly liberating is that? You decide how much you are going to charge. You figure out much things are going cost and then you just pick a number more than that. I learned this key business principle - Pricing Principle #1 - by selling penny candy for 2 pennies.
And then later on... I forgot it.
I grew up. I went to university, and graduated at the top of my class with a degree in Business Admin, from a fancy private school. They taught me a lot about business, but not about making money.
I got a real job, a management position, and started to move up the ladder. I was making a good salary with benefits. I had a prestigious career.
Then, I quit that real job and went to work for my husband, Hotrod, the plumber, when his partner died. His partner, Dick Yox, was his best friend since they were eight years old. Yox had stressed out and worked himself into a health crisis. At age 33, he punched out. He died. On a Sunday, after working a 100 hour workweek.
So, thinking I knew something, I jumped into the family business. However, I'd forgotten Pricing Principle #1. What I did do was buy into a few myths that I learned while I was at university. Myths like, "You have to charge what the market will bear." And that there is this thing called the "going rate"
So I called my competitors, and asked, "How much do you charge for a water heater" and charged what they charged. Only a little bit less, you know, to get the job.
We proceeded to sink into an abyss of debt. Hotrod and I were scared and just hating on each other. Our employees were frustrated. My health and relationships were going down the drain. I mean, this business thing is tough, or you can make it tough. I sure did. Hotrod's friend Yox sure did.
And then, in the pages of a Plumbing Trade magazine, I met another plumber, named Frank Blau. He wrote an article on pricing. He reminded me that you've got to charge more than it cost, no matter what your competitors are charging.
I crunched the numbers, and got real about how much my business was costing. I realized I needed to raise my prices. A lot. But would my customers continue to buy from us if they could buy elsewhere for less?
You see, there was a problem with the Penny Candy business model. It wasn't sustainable. My target market was my mom, and aunts, and the other moms in the neighborhood. They bought from me because of my celebrity (neighborhood kid) status. But I wasn't really adding any value. I mean you could buy exactly the same thing, four doors down, at Lazaleris. If I was going to raise our prices, we were going to have to communicate why we were different and better.
This is when learned two more Pricing Principles. Pricing Principle #2: People will pay for work that they don't want to do. Like plumbing. Like drain cleaning. Like restoration, and pest control. I loves me a dirty job.
And, if you show up clean, sober, on time and dressed right, you can charge five times what the competition is charging. Because those are things that customers value. Pricing Principle #3: When the value exceeds the price, the price can be anything you want.
We quintupled our prices. And we showed up...clean, sober, on time and dressed right. My husband, Hotrod the plumber, didn't just replace water heaters. He delivered at-your-fingertips-warm water. With love. Our customers appreciated these things and paid our much higher prices. We got out of debt and made our own money. These Pricing Principles saved our business. Probably saved our marriage, too.
Successful, profitable businesses are no small thing. On this planet we have to exchange goods and services with one another. Because no one has everything they need to survive.
There are only a few ways to do this. Government is one way. I believe that government has a role. To provide for the common good and to aid in time of need. You have something we need or want and we can lob bombs and take it from you. Crime works. If there were only a black market available, I would participate in it. Charity is another way, though it has limitations. Each of these may have a place.
The most liberating thing we can do it to trade freely with one another. Otherwise we need government or crime or war to charity to get goods and services from one place to another. Honorable, profitable business expands peace prosperity and freedom.
It comes down to how much you are going to charge. Buy it for a penny. Sell it for two.
And, might I recommend a dirty job? Like plumbing. Emerging energy. Cleaning. Or doing anything that someone else just doesn't want to do. Do it so well, that your customers say, "Sheesh. She's expensive. But soooo worth it." You don't have to love the work. You might love the business.
Business is not that complicated. It can be easy. It's your choice. If you want to make it hard, it will be. Don't listen to your teachers or parents or "mentors" if they tell you it is. I'm grateful for my education. However, what I learned about making money...I didn't learn in school. I learned it selling candy. I learned it from plumbers.
This is my best advice, from The Plumber's Wife.