Bob Gauvreau discusses pricing strategy as a top challenge for small businesses. He explains that early-stage businesses often underprice to win work, but as demand rises and capacity tightens they must charge higher prices aligned with the value delivered. He cites Dan Kennedy’s advice to charge the highest price one can without flinching, emphasizes understanding and communicating the value provided, and warns that underpricing constrains growth, hiring, and risk management.
Chapters
In speaking of some of the top challenges that small businesses face, pricing strategy is one of the top. And the reason that pricing strategy is so complicated is as we start our business, the demand for what we offer is super low. And we're willing to take on all work for all prices just to start bringing revenue in. And as we continue to grow or move forward in our business, our demand starts to increase, our capacity starts to shrink a little bit. We can't be doing all things for all people at all prices. Now, Dan Kennedy, who's a great sales and marketing expert, talks about pricing strategy and says you should charge the highest price possible without cracking a smile. Meaning that if you're offering as much value as you think you are in this transaction, you should be able to increase your price. And as you increase that value, because people are willing to pay it. And one of the cool pieces is as we continue to add value in this transaction, as long as the people on the other side are receiving more value than the price we're charging them, they feel like they're getting a deal. And when they feel like they're getting a deal enough that what they're paying is worth what they're getting in exchange, that's when they will pay, and that's when they will buy. So we need to be focused on one, understanding the value that we're contributing, because I think a lot of business owners have this mindset block where we say we don't feel like we're giving that much value when in fact our customers on the other side are going, oh, my God, I don't know what I do without this business or without this solution. So we have to be very aware of that value we're contributing. But we also need to make sure that we're looking at our pricing strategy and, and we're charging enough for our services, because if we're not, we're going to be constrained on our growth, we're going to be constrained on bringing in new team members, we're going to be working more hours, likely making less money. If we have any risks that come up in our business, like if we're a contractor and we go over on pricing or materials because a mistake was made, we could ultimate be ultimately be losing money. And we've got this responsibility not only to ourselves and our family, we've got a responsibility to our team's family and to essentially our customers that if we're not allowing our services to be had, we're not helping them and their families and impacting the world in the way that we need to. So ultimately, all of these components come down to making sure our price is right. If we get our price right, we're charging the highest amount we can, but we're giving more value in exchange. Going to continue to have great success.
