Two Smart Words from One Smart Guy

Marc Andreesen is one of the smarter guys to emerge from the Silicon Valley tech world.  He coauthored Mosaic, which became the first widely-used internet browser. He co-founded Netscape and sold it to AOL for $4.2 billion. He co-founded LoudCloud and sold it to Hewlett-Packard for $1.6 billion. Today he helms the venture capital firm Andreesen Horowitz and sits on the boards of Facebook, eBay, and Hewlett-Packard. He’s even one of just six inductees in the World Wide Web Hall of Fame. (Bet you didn’t even know that was a thing!)

So when Marc Andreesen offers some advice, it’s probably worth listening to—even if it doesn’t seem directly relevant to you or your business.

Last month, “Four-Hour Work Week” author Tim Ferris sat down to interview Andreesen for his “Tim Ferris Show.” Ferris asked Andreesen what words he would put on a billboard to reach the greatest number of people. Andreesen replied that he’s actually considering hiring a skywriter to put two words in front of every startup in San Francisco.

And what are those two words? “Dream big”?  “Cut costs”? “Don’t be evil”? (That’s three words, and Google already claims them.)

No, Andreesen’s two words would be familiar to anyone who’s been around TaxCoach long enough. They’re “raise prices.” And I couldn’t agree with him more.

Andreesen describes the problem as “too hungry to eat”:

“The No. 1 thing—just the theme and we see it everywhere—the No. 1 theme our companies have when they get really struggling is they are not charging enough for their product. It has become absolutely conventional wisdom in Silicon Valley that the way to succeed is to price your product as low as possible under the theory that if it’s low-priced everybody can buy it and that’s how you get the volume.

They don’t charge enough for their product to be able to afford the sales and marketing required to actually get anybody to buy it. And so they can’t afford to hire the sales rep to go sell the product.”

If startups can’t sell, they start lowering prices to boost volume. But at that point, says Andreesen, it’s a race to the bottom.

“It just makes the problem worse. And so, probably the single number one thing we try to get our companies to do is raise prices,” Andreessen said. “By the way, it’s like, ‘Is your product any good if people won’t pay more for it?’”

Raising prices takes confidence, and that’s a commodity that can be in short supply during times of struggle. But I can tell you that I’ve spoken with easily a hundred TaxCoach members over the years who have raised prices substantially—in many cases, by 25% or more across the board. Not one of them has told me they regret it. (Yes, it’s possible to charge too much. But it’s hard to find someone making that mistake!)

So… are you just starting a practice, and hoping to stand out from the crowd as a premium provider? Raise prices.

Are you struggling to take your practice to “the next level,” whatever that is? Raise prices.

Are you looking to re-invent a mature, successful practice to move away from 1040 returns and attract business owners or financial-services clients? Raise prices.

If you’re offering TaxCoach-style proactive planning, you really are worth it!