How to Price a Service Business So It Actually Makes Money | Ep 1002

Alex Hormozi (0:00)

I'm going to help a complete stranger build a $5 million per year business in 90 days, step-by-step, and at the end of the 90 days, we're going to check in and show you exactly what happened. This is Joey. Enjoy. Joey, what's up?

All right. Tell me about the business.

Joey Goone (0:13)

Yes. So my name is Joey Goone. My business is Utopia Experience. We are an event planning company out of St. Louis, Missouri. In Scale or Fail, I am with 400 of my closest friends.

So last year, the average deal size for event planning was 34,000. This year, trailing 12 months is 44,000. Audio-visual average spend is between 20 and 150K per event. Video production is more of a pass-through to just make it easy for clients.

Alex Hormozi (0:41)

Got it. Okay. What's holding you back right now?

Joey Goone (0:43)

I'm just not really sure what the strategy is that we should pursue when it comes to the acquisition channel.

Alex Hormozi (0:47)

So why do you think this can scale?

Joey Goone (0:49)

That's a great question. I'm just like in awe.

Alex Hormozi (0:52)

I love you so much. It's mutual.

Joey Goone (0:57)

Why do I think this can scale? So before I came here, I actually flew here from my sister's wedding in Mexico. I asked 100 people on that trip with us, it's like the entire wedding party, what's one thing in your life that you can never have enough of? I thought I'd get some silly answers because people are drunk, doing whatever in the pool, and I thought I was going to get sex or money, and I got some of that. But mostly what people told me was some version of connection, community, tribe, family, belonging, and that's the industry that we're in. So our industry, what we're selling is fundamentally what people need. It is a human need, it's wired into our primal DNA, and so that's why I think it could scale. The market cap on events right now is 1.5 trillion, it's projected to hit 3.5 trillion by 2033 Amazing. So those numbers back up our industry. I'm so convicted on my quest that I'm going to persevere. I've been resilient since I was a nine-year-old kid.

I know this business is going to grow.

With your help, I'm ready to scale it.

Alex Hormozi (1:58)

Sweet. Walk me through how your pricing process works, because it's very make-believe, right? Yeah. A little abstract. Yeah.

Since you have a margin issue, I think it's a margin issue, how do these numbers get pulled out of thin air? Because right now, it sounds like they just say, we want X, Y, and Z, and then you create some line items, and then make up numbers on those line items, and then come up with a number at the bottom, and then send it to them. I come to you and I say, I'm doing an acquisition.com event. We're going to do a 1,000-person event here in Vegas and we want full AV and some on-site support. When you hear that, what actually goes through your head?

Joey Goone (2:35)

What's included in every package is a $15,000 overall retainer to retain our services. So that's the first thing.

Alex Hormozi (2:41)

Like a one-time upfront fee that gets added on to the other make-believe prices.

Joey Goone (2:46)

Exactly. And then after that, it's sponsor management, that's about $15,000. Then there's vendor management. Vendor management is managing all the contractors. So it's the photo booth, the video production team, all of those elements that come into the event. It's the venue procurement strategy. So if you guys, if you're taking your team to some other place outside of Vegas, you need a hotel.

Which hotel are you going to work with? How are you going to get people to and from the airport?

Alex Hormozi (3:14)

So you'll bill for the logistics of managing that as well, if it's part of the scope of work or whatever?

Joey Goone (3:19)

Right. That's 7,500.

Alex Hormozi (3:20)

Is there anything about headcount?

Joey Goone (3:22)

That's the thing. So we learn a lesson, we put the guardrails up, and so now we're actually deploying tiered structures, where if you have over a certain number of attendees, or over a certain amount of vendors or sponsors, then there's a tier where you pay more based on the number of people that you have.

Alex Hormozi (3:37)

Got it. Okay. I think I know what to do. So you want to hop on the side?

So there's a demand gen issue for sure, but I think that part of it is because you're mispriced. And so the pricing has to do with the offer. And so we kind of have to start with the offer and then fix price and then go sales motion and then go demand increase. Does that make sense?