Small businesses are the backbone of economies around the world. In fact, according to the U.S. Chamber of Commerce, small businesses makeup 99.9% of all U.S. businesses, employ 46% of America’s private sector, and represent 43.5% of gross domestic product (GDP). They create meaningful jobs in local communities regardless of size and contribute to the economic growth of industries that large corporations, such as travel and hospitality, often underserve. While their economic impact is significant, most small businesses operate without employees or employ minimal staff, which means that small business owners carry the bulk of the workload and wear many hats.
It’s clear that entrepreneurship is not for the faint of heart. According to the U.S. Bureau of Labor Statistics, 18% of small businesses don’t last to the end of their first year, and around half of all fail within five years. Small business owners are makers, creators, and innovators. They’re also passionate game changers armed with determination, tenacity, focus, organization, flexibility, and conviction. They often devote much of their time to ensuring that their business is successful—from placing orders and managing inventory to working with customers to resolve complaints and building customer loyalty. With the constant ongoing activity and lean teams, small business owners must make decisions and act quickly to keep operations moving, which can make space for second-guessing and may leave some entrepreneurs feeling like imposters.
Imposter syndrome is a common experience. While often hard to quantify, a recent study showed that 84% of entrepreneurs report struggling with feeling like an imposter at any given time. It often takes form in an internal voice—a constant, beguiling voice—that seeks to break down confidence and propel self-doubt. For small business owners, this can lead them to undervalue their products or services, which can significantly impact revenue. However, by understanding the importance of pricing strategies that match the value of your business’ offerings, business owners can work to overcome imposter syndrome and ensure steady revenue growth.
Understanding the impact you have on your customers
Implementing a pricing strategy that will keep your business competitive and maintain revenue growth begins with understanding the true impact your products or services have on your customers. To ascertain impact, you must first identify the pain points that your product or service can alleviate and note the outcomes your customers seek by purchasing from your business.
Impact falls into two categories – emotional impact and rational impact. Rational impact, or a quantitative assessment of cost or efficiency gains, is what most businesses prioritize. Still, you are leaving a key factor on the table if this is your only consideration. Emotional impact is a qualitative assessment of how your product or service makes your customers feel. Perhaps shopping at your business gives them peace of mind because they know that you offer high-quality goods and prioritize customer service, or maybe you carry a brand they admire. Either way, many customers buy based on emotions and justify their purchase with facts.
It’s important to understand the different ways in which you impact your customers. You can conduct surveys or talk with your customers—and prospective customers—to learn more about your differentiators from other competitors. Understanding your impact is the key to charging what your product or service is worth and eliminating any self-doubt that comes with attaching a price to what you sell.
Evaluating the market to keep your business competitive
To set competitive prices, you need to understand the competitors in your market. Through market research, analyzing competitors’ pricing strategies, and understanding customer needs and demand, you can create a benchmark that can help you set prices. However, it’s important to link your price to the impact you have on customers and factor in your unique selling proposition.
If you can identify the customer segment that brings in the majority of the revenue, you can base your prices on the impact that your product or service offers to your customers. This requires a dynamic approach since value and impact will change over time and per customer segment. Focusing on your ideal customer profile can help you maximize sales and revenue.
Going to market with confidence
Once you understand your impact on customers and your competitors, you can go to market with the confidence that your pricing strategies and sales approaches are a true reflection of the value you bring to the marketplace. It’s also important to note that there is always room for continuous improvement and evaluation, and small business owners can leverage new technologies to better manage their data and track sales and revenue to enable informed decision-making. A great example of a strong go-to-market strategy includes food brand Omsom, which started as a startup and was acquired by DayDayCook to help the company become a leading force in the Asian food industry.
While overcoming imposter syndrome takes time and reflection, leaning into pricing strategies based on impact can help you quiet the voice that asks you to second guess your business’ worth. When your offerings are priced to match the value that you offer, your business can remain competitive and see revenue growth for years to come. Over time, you can build confidence through success and become a seasoned small business owner with a solid understanding of your market and pricing strategies.
Ben Hussey is the Chief Revenue Officer at Katana.