September 25, 2024

Should I offer a guarantee if I am only 80% sure I’ll succeed?

Earlier this month, I sent out an email about offering different types of guarantees.

A reader wrote in with a follow-up question about whether to offer a guarantee when you’re not 100% sure of success:

Reader:

Would you advise the same for service-based businesses that offer an outcome like a 20% increase in conversion rates?

Jonathan:

Are you asking for yourself, or is this a hypothetical?

Reader:

Myself

Jonathan:

Gotcha.

If you were picky about your clients, how confident would you be in making a promise like:

“I’ll increase your conversion rate by 20% or give your money back”

Reader:

I’d be pretty confident, say about 80-90%, if they follow my process and have some prerequisites in place.

Jonathan:

Very nice!

So, in theory, this means that for every ten clients you worked with, you’d end up refunding a max of two of them.

But offering the guarantee would likely allow you to charge significantly more than you are now.

Let’s say you’re charging $1000 per client now, with no guarantee. With ten clients, you’d bring in a total of $10k (and one or two of them would be disappointed with their results)

If the guarantee allows you to close deals at $2000 per client, then you’d bring in $16k ($2000 times 10 clients minus $4000 in refunds) and everyone would be happy.

This is a lot of guesswork on my part, but that’s the general concept with guarantees.

Reader:

Wow. I never thought of it like that. Thanks a lot, Jonathan.

Jonathan:

Glad to help!

Yours,

—J