The Price is Right Interview Series: Ramit Sethi

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So far this week, we have learned about the big picture of pricing in small business from John Jantsch, and tips on the inner game of pricing from Mark Silver.

Today we get some great, detailed information about transitioning from giving away all your content for free on a blog to selling well-priced products and services. Our guest expert is Ramit Sethi from I Will Teach You to be Rich.

Ramit and I have known each other a long time, in Internet years anyway. I have watched his company growth with a watchful eye, since I really admire his business sense and personal backbone. He is one of my young mentors.

Please take the time to follow the links in this post, since I think reading the comments from real readers gives you a great sense of what to expect from moving from free to paid services. Not that all your readers are as, um, forthright as Ramit’s. 🙂

Pam: You are a great example of someone who went from a totally free blog ( to a book to a range of product and service offerings. How did you handle the unique pricing challenges that face bloggers who go from free to fee?

Ramit: I didn’t put ads on my site for 3 years because I was worried about credibility (especially with a name like “I Will Teach You To Be Rich”). And I was more interested in building a brand than direct monetization. But finally, I decided to ask my readers what they thought of ads, and 81% of them said they wouldn’t mind unobtrusive ads.

So I tried that for a while. Eventually I decided to try releasing a product, so I wrote an ebook and priced it at $4.95 — just to see if people would pay for value. Over 1,000 people did, so I realized people would pay for great content if it helped them.

The key challenges have been:

  • Making the transition from free to paid. Some people don’t like change, especially when they’ve been getting everything for free. Ultimately, though, I can offer a much higher quality product — video courses, case studies, live webcasts — if it’s paid for. You can use tactics like money-back guarantees and free samples. But ultimately, some people are not going to be happy and that’s fine…they can continue to get the free stuff while others go deeper with paid stuff.
  • Demonstrating to people that paying for value is important. Too many people online expect everything to be free. I constantly talk about how paying for value is important — and then I try to show people by illustrating what I pay for, and why it’s better than trying to get everything for free.
  • Highlighting the psychology of freeloaders. It goes something like this: “Why would I pay for this? I could get all this information for free…” Sure, you probably could…but have you? A lot of readers read 15 blogs each day, but have they actually automated their finances, cut expenses, started earning more, and negotiated fees? Action is more important than reading.

Pam: A lot of my readers worry about charging for the first time. How did you get through that?

Ramit: Instead of me talking about it, check out what my readers said.

You can literally see the commenters become more comfortable paying for value. But notice that it takes time, conditioning, and patience!

Pam: Why do new entrepreneurs get paralyzed with pricing? How can they break this paralysis?

Ramit: This happened at my prior startup: We spent months debating pricing and finally our board blew up and told us to just get something out there.

You can spend months strategizing on pricing, or you can pick a reasonable number, roll it out to the market, and tweak based on what their response is.

I call this the 85% Solution: Get 85% of the way there and get on with your life. Your end goal isn’t really to optimize your pricing — it’s to get consistent business and live a lifestyle of your choosing.

To get specific on pricing, here’s a common mistake I’ve made: I picked a number that sounded reasonable (“I think $20/hour is fair”), which was of course too low and completely off the top of my head.

Gut feel is important. But I encourage entrepreneurs to match it up with some competitive research: What are others charging? Do they have products/services on the backend? For example, charging even $150/hour is a difficult business when you factor in prep time, cancellations, and other invisible costs.

So research matters. But ultimately, it helps to pick a price and test it: See what the market says (i.e., do you get customers), and then figure out how to adapt your services and pricing to generate more revenue.

Pam: In an earlier conversation, you mentioned to me that people should “work with people where the price is worth it.” What do you mean by this?

Ramit: Years ago, American Airlines removed one olive from each first-class salad, resulting in $40,000 savings each year.

If you were the consultant who recommended this, how much could you charge?

The point is this: Remember that to justify a higher price, you have to work with people where changes will generate large results.

I’ve seen this happen: Let’s say based on some market testing and gut feel, you decide your consulting services should cost $200/hour. But if your audience consists of people just starting out their business, it’s going to be nearly impossible to charge $200/hour. Even if they thought it was worth it, they simply won’t have the money to pay you.

I was recently doing some consulting for a woman who paid me $17,000. After our first phone call, here’s a direct quote from what she sent me:

So, I hung up the phone Friday and my first thought was, “Geez, THAT was probably worth 17 grand.”

It’s not just my advice. It’s the fact that she has a business where a small change can produce enormous results.

Whether your clients are doing high-volume or high-priced work, you can justify higher fees if your results will generate extremely large results.

Added Bonus

Ramit and I have both been the benefactors of enterprising new entrepreneurs who pitched us free services for a trial period, then proposed paid services, which we eagerly bought. Watch our 10-minute discussion about this pricing strategy on this video (link here)

If you want to read the post Ramit mentioned about Charlie Hoehn’s ebook Recession-Proof Graduate, see here.

You can find Janna Marlies editing services here and her cool Urban Hive project here.

And thanks to Tim Grahl from Out:think who redesigned my book page to be more punchy (for free), and who is on task to do some additional enhancements to this site (for fee).

Thanks Ramit for sharing your pricing journey with us! Find him at

Next up in the pricing series tomorrow: Thought Leader International CEO Andrea J. Lee. This is a practical, juicy interview, and I can’t wait till you hear it!

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17 Responses to “The Price is Right Interview Series: Ramit Sethi”

  1. zobacz says:

    Asking questions are really fastidious thing if you are not understanding anything entirely, however this
    piece of writing presents nice understanding yet.

  2. I’m thinking at hundreds of thousands subscribers Sonja, after 1000 copies sold of his first ebook, one of the best in my opinion.

  3. Sonja says:


    how many subscribers did your blog have when you released your first ebook and sold 1`000 copies?

    Thanks, Sonja

  4. very nice post, thanks for sharing it with us, please keep up this great work

  5. Interesting useful post. Thank you!

    And love your title — great play on words.
    .-= Whitney Johnson´s last blog Can ‘Nice Girls’ Negotiate? =-.

  6. Patrenia says:

    WOW!!! Great interview. I really admire Ramit for his “tough” skin. I have been following his blog for a while and always notice the people the “have” to make negative comments. If the product isn’t for you….MOVE ON!!! Geez.

    Anyways…I am learning so much from both of you. Keep up the good work!!!

  7. Leslie says:

    Great post and video. On “working for free to get hired”: it works. Going back years when I first started looking for jobs, I always offered to work for free the first week or two, and told them I was confident enough to do this, because I knew they would be so pleased with my work they would definitely want to hire me. I always got the job and they always insisted on paying me from day one.

    On pricing, one lesson I’ve learned as a marketer is be wary of what a customer tells you they will pay. I’ve done product launches and focus groups, and what someone tells you they will pay (or tells you at all in a focus group), for a product, will often times turn out to be very different than what they end up willing to pay (usually not as much). Researching other products, knowing your target audience, and then testing the price, are all very important as pointed out.

  8. Nate says:

    Great article! Pam, you and Ramit are probably the first two blogs that I ever read. I heard about one of you from the other, but I forget which one I heard it from 🙂

    At any rate, I’ve been following both of you for a very long time and I think that both of you are doing tremendous things. I’ve also followed your evolution in working towards business models that generate income and in both cases I saw the initial backlash.

    I remember awhile back when you were spending a lot of time on your book and I think you even had an article promoting Ramit at that time and his new book. I was a bit perturbed by someone’s comment of how you were neglecting your blog and you were totally focused on making money. I guess that’s some of the inevitable backlash you can expect when you do that stuff….I guess what I’m getting at is that I love what you and Ramit do because you’re both genuine people. It’s so obviously clear that you are both passionate about your subject matter and your readers. So, to me, producing products and even charging for them is a good thing. It’s providing even more value.

    Thanks for doing this series – great stuff here!
    .-= Nate´s last blog ..Getting a Living =-.

  9. Steve C says:

    Pam & Ramit,

    THANK YOU for this information…really. Very helpful for a fledgling online publisher (myself). I’m going to go search Ramit’s site now.

    Although it wasn’t an online business, when I was independently employed doing remodeling work, on several occasions customers told me I should charge more than I was, but I couldn’t bring myself to do it. Is that a self-esteem/insecurity issue?

  10. Dape says:

    Pricing has always been a problem in my own personal work because it often involves friends. In the business world, pricing remains structured for the position I hold. However, saying that, there are requests for advice that take up a considerable amount of my time. There must be a way of saying politely, without offending clients, that time is probably one of the most important factors in costing when giving advice to customers.
    .-= Dape´s last blog ..How Important Are Headlines For Search Engine Optimisation? =-.

    • Pamela says:

      So true Dape! I don’t think it matters what your profession is, creating a clear line between your friendships and your work is not always easy. And time is very precious, so I am right with you, it is a huge part in the pricing equation.


  11. Barbara Saunders says:

    Thanks! This is a really useful post. I know both of you (especially Ramit) tend to stay away from the touchy-feely, but I think there’s room for a bit of it here. I know I’ve struggled with this, and I’m sure other people do, too.

    Many of us who were groomed to be “professionals” too closely conflate our pay with what we “do” and not with the value we create.

    If we are accustomed to holding down well-paying “ordinary” jobs, say with salary in the high-five to low-six figures, we tend to conceptualize it something like, “I spend my year working hard using my analytical powers and graduate school training to evaluate budgets and write reports, and that’s worth $90K.” It takes an effort to switch to a mindset that says, “If I use my analytical powers and graduate school training to educate a business owner, and it only takes 10 45-minute consulting sessions, and he saves $200K over the next year – THAT’s worth $25K.”

    That shift in attitude changes everything!

    • Pamela says:

      That’s a really great point Barbara! I will be interviewing Sherri Garrity for the Saturday pricing series, and she has some specific guidance on pricing for people moving from corporate to entrepreneur.

      Stay tuned!


  12. Pamela says:

    Nice insight Willie, I didn’t really think about it at the time, you are right, that could be an example of a gender difference at work.

    Although as Ramit and I have discussed before (where he is sometimes looked to as the guru of all things Indian in entrepreneurship and me all things Female just due to our DNA), it could just be an example of individual differences. What do you, as a representative of all African American male entrepreneurs, think about this topic? 😉

    I do view my blog and biz as my babies, so maybe it is a maternal thing. 🙂

  13. I like the point you made (but didn’t really call out) about the subtle difference with men and women from the help-needer’s perspective. Ramit seemed to be interested in the value of the work primarily, and you expressed an interest in feeling comfortable with the work that needed to be done.

    Demoing the suggested work proposed is a great way to both show the quality of the work and to mitigate risk/apprehension. Nice.