Posted by Matt Register

Chuck Reaves, Founder of  Sales Suites, joins us in a National Advisor Showcase segment to talk about sales and the difference between cost and price.

Please excuse any typos in this hasty transcript.


Matt Register: Hey guys, welcome back to the show. Texas Business Radio. Texasbusinessradio.com is the website. See the entire thing in beautiful, high-definition video. Get your questions in, 844-814-8144 is our 24 hour call in line. That means call in now, call in later. We can get the experts on here to get those questions answered. We also monitor #TBR on Twitter. TBR, Texas Business Radio, or go to the website, get your question in that way.

I’m your host, Matt Register, Jay Curry, my co-host had to step out. He’s going to join us here shortly, but in the meantime, if you listen to this show for any length of time, you know we do a segment we like to call National Advisor Showcase. There’s a lot of national level speakers that come into Texas, talk to CEOs, they have a wealth of information to share on how to grow your business, and we love having them in here and talking to them. Right now is no different.

Chuck Reaves is here in the studio. He’s here in Houston, Texas talking to some CEOs about how to increase your bottom line by not competing on price, competing on value. His company is salessuites.com. We’re going to have that link from texasbusinessradio.com. In the meantime, Chuck, welcome to the show.
Chuck Reaves: Great to be here, Matt. I’m impressed with what you guys are doing, this is great. Business owners want as much information as they can get in fast doses, and it has to be quality stuff. It sounds like you’ve broken the code on that one.

Matt Register: Well, I’m not claiming that, but we certainly try. Growing your businesses is hard.
Chuck Reaves: Absolutely.

Matt Register: There are a whole lot more small businesses than there are middle market businesses because that transition is very, very difficult to do.

Chuck Reaves: Yes.

Matt Register: Talk to me about what you’re here talking to CEOs about.

Chuck Reaves: The myth is, if we raise our prices, our volume will go down, maybe we’ll be okay, or if we want to grow our business, we have to lower our price in order to increase the volume, to get more market share to grow the business. None of that is true. You can raise your prices and your volume simultaneously as long as you’re giving a value proposition to each individual customer based on what that customer is trying to achieve right now.

Matt Register: You know, it’s interesting. We tell people all the time, “Price is the lowest form of competition.” Right, I mean-

Chuck Reaves: Oh, absolutely. Absolutely, and nobody ever bought anything on price. Now, as you might imagine, I get some push back on that one. It’s not price they’re looking at, it is cost. I teach the difference in cost and price, and the only relationship that exists between cost and price is an inverse relationship. The item with the lowest price tag typically costs the most.

Matt Register: It’s the poor man and the boots story, right?

Chuck Reaves: Yes, exactly.

Matt Register: It’s the rich man buys $100 pair of boots that lasts him for 10 years, and the poor man buys $50 boots that he buys every single year for 10 years, right?

Chuck Reaves: Yup, exactly.

Matt Register: I mean, the price is lower, the cost is a lot higher.

Chuck Reaves: Yes. Once a business owner understands that and takes their proposition to their customer, and shows their customer how to take it to their customer, then you’ve got supply chain selling going on, and everyone appreciates it. When we look at consumer products, we say, “Well, consumer products have to sell on price.” After all, that’s what Walmart is all about, that’s what Best Buy is all about.

When was the last time you saw Bose products discounted, or Apple products discounted? The truth is, if you’ve got the right message, the product has to be supportive. You have to have a quality product, obviously, but there’s no reason for you to ever have to sell on price.

Matt Register: Well you know, every time they launch a new iPhone there’s people wrapped around the building saying, “Take my money,” right?

Chuck Reaves: Exactly.

Matt Register: I mean, for a premium priced phone. Talk me through a typical client of yours. When you walk in the door, and what is it they don’t understand about this?

Chuck Reaves: Oh, great question. First of all, when I’m called in, they know my reputation, so they would like to raise their prices. Typically, they’re in the market or an industry where the competition is purely selling on price. They’re dropping prices, there’s a race to the bottom. Somebody gets within a termite’s eyelash of cost. The next person goes down the cost, and somebody goes below cost thinking they’re going to make it up in volume.

Well, if one company in an industry can start dragging an industry down, could one company start bringing the industry back up? That’s typically when I’m called in. I sit down first of all, with the chief. What is their desired outcome? What do you want to do?

I had one client who said, “I’ve always wanted to be a $100 million company.” He was doing about 30, and couldn’t get anywhere with him. I said, “Well, bring your executive team together tomorrow. I’ll show you how to be a $100 million company next year.”

They wore ties. They had never heard such a thing. He said, “Well, you consultants are something.” I told him, “Drop their price to $1.00 from $1.97, and we would sell 100 million of them, and they would get their hundred …”

Matt Register: Because what he said he wanted wasn’t really what he wanted, right? I mean, that’s …

Chuck Reaves: He wanted revenue. Now, then we started talking about profit. He was selling frozen pies, as it turns out. He was selling his for $1.97 and it cost him $2.10 to make it. I’m not a genius, but I can see a problem in that market.

Matt Register: Scale doesn’t help him there, right?

Chuck Reaves: Not a lot. So nine months later, they were selling a pie at retail for $16 … excuse me, $64. We would slice it 16 times and sell it for … There’s a reason why people will pay more, and sometimes we get so close to our business, we get locked in. We become myopic. We don’t really see the opportunities that could be out there.

I start with who else and what else. Who else could you be selling to? What else could you be selling? Then we go to the marketplace and talk to their customers, and we ask simple questions like, “What did my client’s product do for you last year?”

Had a software company, the CFO of a previous company became the CEO of this company. They have a Six Sigma software, and they were selling to GE. When he took over as CEO, he called me and said, “Come work your magic again.”

He said, “Your first job is to figure out how we can un-sell GE.” Because before he got there, someone sold GE an unlimited, lifetime license for $50,000. You can see three problems there, right?

Matt Register: Oh yeah.

Chuck Reaves: Okay. I said, “You don’t need a sales developer or sales trainer, you need a good lawyer to go unravel that.” But I said, “Go ask GE what your software did for them last year.” The $50,000 purchase in the last nine months of the previous year saved GE almost $1 billion, with a B, dollars.

Matt Register: Wow.

Chuck Reaves: We start with, what are you worth to your customer? It doesn’t matter what your competitors are charging. It doesn’t matter what it cost you to make the product. Cost plus is the fastest way to go broke in America, I think.

Matt Register: Well, I’ll tell you what. The cost plus is certainly a way to establish a floor, right?

Chuck Reaves: Well, it is.

Matt Register: Of this is the minimum I can charge for it, right?

Chuck Reaves: Yeah.

Matt Register: But then you got to take a hard look at, what is it worth to them? We were talking during the break very briefly about some quick repair work I had done where the customer’s losing millions of dollars a day. Us being able to do it faster, there’s really not a number we could tell them that’s going to upset them, right?

Chuck Reaves: That’s it. That’s it. I have a client that can do in three minutes what their competitors take three weeks to do. They do disaster recovery stuff. You have two vendors come in. One can have you back up and running in three minutes. [inaudible 00:08:15] can have you up and running in three weeks. Which one are you going to go with?

Matt Register: But they’re cheaper, right?

Chuck Reaves: Yeah, and save that money. Oh, for Pete’s sake. So I live with a number of Chuck-isms. There’s 50 some odd Chuck-isms, and one is, the only difference in cost and price is the ratio, obviously, but the person who is buying on price is not buying on quality. They’re not buying on longevity. The only thing that hurts more than losing a sale to somebody with a lower price is losing it to somebody with a higher price because they could sell their value.

Matt Register: Yup. Nope, I understand. If somebody wants to learn more, where do they need to go?

Chuck Reaves: They can go a number of places. Salessuites.com. There’s four S’s in there. They can go to chuckreaves.com. We spell Reaves, R-E-A-V-E-S. One of my ancestors realized that the R double E’s were just moonshiners, so they changed the spelling.

Matt Register: Got it.

Chuck Reaves: They can also go to diysuccess.com, and they will land on the LMS, the Learning Management System page. We will teach them how to sell, we’ll teach them how to speak. There’s a lot of free content there on the Chuck Reaves site. Tons of free content, video, articles, and they can sign up for the free newsletters.

Our goal is to educate. The single most important function of sales is to teach. The single most important function of management is to teach. The single most important function of leadership is to teach. As long as we’re teaching our customers, they’re going to buy from us.

Matt Register: Yeah, no doubt about that. I mean, the entire way that the sales cycle is has changed with technology. I mean, people are educating themself before they’re ever willing to talk to a salesman-

Chuck Reaves: Oh, absolutely. And the sales people need to be capitalizing on that. The three primary drivers of change and sales are demographics, we’re seeing a lot of new demographics, process, and technology. So every year I’ll look at the Consumer Electronics Show. What are they bringing out that will help sales people? AI and AR are here. We’re looking at all kinds of qualification and quantification tools. Sales is going high-tech.

Matt Register: Yup, no doubt about that. Chuck Reaves, salessuites.com. We’re going to have all that linked from texasbusinessradio.com if you’re driving and can’t take notes. Unfortunately, we’re at a hard break. We have to take a break and go pay a couple of our own bills. We’ll be back right on the other side of the break with a whole lot more Texas Business Radio. Don’t go anywhere.

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About the Author
Matt Register

Matt Register

In addition to hosting "Texas Business Radio," Matt is an investment banker and serial entrepreneur from Montgomery, Texas. He is the owner of RREA Media and Register Real Estate Advisors and a Managing Director and Principal at Corporate Finance Associates. He has a BS from the United States Military Academy at West Point and an MBA from Rice University in Houston. You can read more about Matt HERE.

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