As an entrepreneur, it is easy to believe that the sky is the limit. After all, we start and develop businesses based on the idealistic belief that we can actually create change in the world. That belief drives us to focus on what we can do with our skills, resources, and ideas.
But, after almost two decades as founder and CEO of my own business, I have realized that it is just as important to recognize on what you can’t do as well. And one of the most important “can’t” lessons is linked to a basic facet of any business plan: the pricing structure. Whenever you sit down to figure out the optimal price of your new good or service, you have to remember the Impossible Trifecta:
Cheap + Fast ≠ Good
Fast + Good ≠ Cheap
Good + Cheap ≠ Fast
So if you provide something cheap and fast, it won’t be good. If you provide something fast and good, it won’t be cheap. And if you provide something good and cheap, it won’t be fast.
That’s basically my golden rule for pricing. You have to pick two and stick with it, because it is impossible to hit all three without tanking your business.
The trick is to figure out which combination works best and which trait you can afford to leave behind. For instance, I think the worst option is “fast and cheap” because quality is almost completely forsaken.
It’s admittedly simple but remarkably accurate. And it is a rule that reminds me of my options as well as my limitations – which, as all entrepreneurs will agree, is important to keep in mind as you move forward with your business.