Small Business Entrepreneur Blog

I’ve been trying for some time now to evaluate the prices I set for the services we are providing. Although I’ve described before my opinion on dealing with low quality competitors in an article I’ve named You can’t compete against bad quality, having a part time business plays an important role in deciding the prices. After all, you are not able to answer customer demands during the day, the development process takes a little longer as you only work few hours a day, and mostly you have a general feeling that you should go cheaper.

Now, going cheaper is not really a wining situation on the long term. For at least one of thereasons:

• going cheap will cut down your margin. You only have a limited amount of time to put to work in the evenings, no way you could recover on volume.
• as a result of the above, your partners (if you have) and ultimately you won’t be very happy at the end of the year. That’s especially bad, as it will cut down your desire to do the extra work required by the business.
• you’re sending the wrong message to the market. Cheap means low quality.
• cheap cuts the wings of long term development. You will invest less. Use your old printer more. Use your old laptop more. You’re not going to have the best tools for the job.
• your employees will think cheap. If you set your prices low, they won’t go higher. They will be lazy and sell cheap, because it’s easier.

There are a lot of things that can go wrong if you sell at a low price. Pricing strategies are really important for small businesses.

Ok, I’ve also made a little research on the low pricing strategies, and let me share this with you. Here is what I’ve found.

The The Ithaca Journal says that Low prices are no guarantee of profits, with an interesting point of view:”After all, they see tons of advertisements for big companies that only seem to emphasize low prices. And they know that they comparison shop before they make purchases. So they think that a strategy of low prices is the path to success.”

Darrell Zahorsky – the Small Business Information Guide for About.com has a short article on it as well: “Larger competitors with deep pockets and the ability to have lower operating costs will destroy any small business trying to compete on price alone.”