Get Yoda's Wisdom

I can't begin to count the number of small business owners that I have spoken to and advised, whose nearly first comment, as they describe their business, is how low-priced their product or service is. Now, being the low-priced provider is one thing, but making price your leading advantage is again another... and not a good one! How you price and how you use price are critically important to a small business, especially when you are competing against much larger competitors.

Don't lead with price.
Too many small companies make the mistake of figuring that leading with price will win the day, often lowering an already low price to ensure success. Shaving margins, leaving money on the table and maybe, ultimately, still not winning the business. Like the old saying, "if your only tool is a hammer, every problem is a nail."They focus so completely on price, and a lower price at that, that it raises questions in the minds of the prospective customer if they are getting lower price because your product or service is of less quality or depth.

Know the real cost of delivering your product or service.
Knowing the cost of delivering your product or service (not just cost of goods sold, but also what it costs to sell and support it) is absolutely critical to establishing a price at which you can make money. Most often a small company can price itself under most or all of its larger competitors, carrying less overhead, having a lower cost base, etc., but it needs to be sure it understands its cost vs. its price and is generating margins it can live and grow with.

Review pricing regularly.
Pricing needs to be reviewed periodically. I had a client that was so proud that they had not raised their prices in more than ten years. When I asked them if they had given out any raises during that time or if the cost of materials and services to deliver their product had increased they looked at me like "a deer in the headlights." Oops... never thought of that! No good having the lowest price if you aren't making money at it.

Price is only one element of a successful sale.
Price is only one of the key elements necessary for successfully selling a product or service. Obviously, a given is that no matter how low-priced your product is, if it doesn't meet market and potential customer requirements, and isn't of high quality, you won't sell very much. But beyond the obvious, is how you deliver and support that product or service. This is often where the small business can really show and provide its difference. The care with which you and your employees develop and deliver your product or service and the extent to which you support and service it, are as critical, if not more so, than pricing. Plus, the small company can and will be more customer-attentive, providing service levels that the larger company competitors often cannot compete with. Tie this to your price. You're not just lower priced, but more cost-effective for your customer. In short, they get more, for less!

Don't lead with price. Let price speak for itself. After you've convinced them that your product or service is a high quality one that more than meets their requirements, show them (especially through current customer references) that the service and support level that they will get with it will surpass their wildest expectations. Then your price makes a difference!

"The Entrepreneur's Yoda" knows these things. He's been there. May success be with you!