In a comment on an earlier post about small business pricing, Chris Hopf asked:

How different should the approach to effective and profitable pricing be, between Fortune 500 corporations and Small Businesses?

What can Small Businesses learn about pricing strategy and tactics by watching what Fortune 500 corporations do?

Chris, these are great questions, that deserve a really good answer. That won’t come at this time of night. But that does bring me to the most important thing about pricing in a small business. For a large business, better pricing means better profits, better relations with Wall Street, higher stock prices, career advancement, and so on. In a small business, better pricing translates very directly to how much money is in your wallet, and how much of a life you can have while you run your business. Based on this, and the current time, many people will question my credentials as a pricing expert.

Seriously, though, this is the major difference. If you can price 2-5% better, you can probably make the house note, pay for your kids’ soccer equipment and so on, working a lot less hard than you do now. Or, for the same effort, you can earn much better rewards.

I’ll comment further in a future post on actual practices, but this is the most important thing– the gut-level reason that pricing is so important for small businesses.

One Comment

  1. Jon

    Chris (& Reuben),

    I do a fair bit of pricing consulting work with SME’s (small & medium sized enterprises). If I could, I would only work with SMEs: not only do you get a relationship (as you do with a big corporate client) you also get a friendship. But alas, I digress as well.

    Here are a couple of bullet points on the (pricing) advantage of being an SME:

    1. SME’s can generally move faster than a large corporate;
    2. SME’s are better placed to take advantage of niche markets;
    3. SME’s can provide service (just think about that one for a minute);
    4. SME’s can order direct in response to local demands, and;
    5. Often, SME’s are better placed to provide solutions, rather than bundles (Solutions = price premiums, bundles = discounts).

    There are a couple of articles on pricing for SME’s on my website (not wishing to pinch any of Reuben’s blog traffic) that you may wish to check out.

    And Reuben, don’t undersell your pricing expertise…no matter what hour it is ;-). I see your blog is getting spammed…mine too!!!

    Jon

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