How Lesswrong helped me make $25K: A rational pricing strategy

post by kareemabukhadra · 2020-12-21T20:20:18.485Z · LW · GW · 21 comments

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3 months ago, I started a company that helps people land jobs in exchange for a cut of their income once they land a job.

Since then, I've closed 5 customers worth about ~$25K. I strongly attribute my ability to close deals to how I price. I strongly attribute how I price to ideas I've developed reading Lesswrong (especially concepts from Economics like Shut up and Multiply).
 

Word for word, here's how I walk customers through pricing on sales calls:
 

• There are 52 weeks in a year.
• Each week makes up about 2% of a year.
• That means the opportunity cost of you not working is 2% of your potential post tax salary per week
• Does that make sense?
• Remind, me, what role are you trying to get?
• Great, x make about $YK per year (.75% to get post tax) which is $ZK per year post tax so on a weekly basis you're losing $XK.
• On a monthly basis, that's about $XK.
• Does that make sense?
• Base case: The average job seeker spends 5 months or about 22 weeks in unemployment & that's during non-covid times.
• I can help you get a job in less than half that time, 2.5 months or the equivalent of 10 weeks. I just did it for my first customer in 6 weeks.
• That’s 12 more weeks of you working or a little over 23% of a years’ worth of income.
• So to be clear, in this case, working with me would help you save 23% of a years' worth of income or potentially x$K dollars.
• Do you understand how I got to that number?
• Great, so the way I go about this is I split that value of 23% halfway. In other words, I give half the savings to you, and then take the other half for myself, leaving us both with 11.5%.
• Does that make sense?
• Naturally, you may be thinking, "what happens if we're not successful?" Here's a few possible scenarios:
  • If you land a role in the 22nd week (which is the average amount a job seeker looks for a job) or any point after, I don't get any cut.
  • If you land a role after the 10 week mark, the percentage cut I get drops incrementally each following week, up until the average case of 22 weeks. For example, if you start a role on the 16th week which is 6 weeks quicker than you would have originally gotten it assuming the average case, then we would be splitting (6 / 52) or 11.4% of the value.
  • As a final point, if you have not landed 10 or more interviews by the 10 week mark, you reserve the right to end our contract. This means you will not pay anything for my service. This decision to end our contract needs to be made between the 10th and 11th week. Otherwise, the assumption is that we'll continue to work together under the conditions outlined in the clause above.
  • The above happens if you have no interview that leads to job offer.
• Does that make sense?
• And just to be clear, in either case, I'm not factoring in any of the following:
  • 1) Benefits which can make up to an additional 30% of value of the salary.
  • 2) Higher compensation that you'll get from the job when you work with me cause you'll have better offers and because I help with negotiation.
  • 3) More fulfilment that you'll get from the job when you work with me cause we're gonna get a bunch of interviews.
  • 4) I'm betting on you as a person to put in the work with me to get the job. If you don't, I get screwed not you. I lose my money & time. So it's really important to me that you're serious about this before we go forward.
  • 5) I don't charge anything additional for the tools we use which cost hundreds a month.
  • 6) You're learning how to get a new job in 2 months. Ever been in a poor work environment? Imagine being able to leave that quick. Now you'll know how to.
  • 7) Don’t capture any bonuses or raises you get during the first year.
  • 8) Don't capture any equity or other forms of compensation you get in a role.

At this point, I'll usually walk them through a few other caveats (unmentioned here for simplicity & brevity's sake) then close up the call.

 

Feel free to critique this pricing model or share ways rationality has helped you model decisions and/or bets.

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