Chapter 12: Setting the price in SMEs
A Global Perspective
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Together with my business partner, I developed and operated a small take away food business with catering for five years. He was in charge of preparing the food, while I was in charge of the company organization, purchasing and staff. The business had about ten employees and two selling units. The business was doing well until a new competitor came in the market, while at the same time the economic conditions in the region worsened. Until this, the business was focused on food quality and did not care about prices. We had set them so that we could cover all costs and have a decent profit. In two months the situation changed and sales started to decrease. The new restaurant in the market was offering similar takeaway food for lower prices along with the option to eat in the restaurant. The situation was becoming stressful and we had to do something or close the business. For the first time we wondered if we had the ‘right’ prices and if we needed to lower them; and to analyze our cost structure in detail, both direct and indirect costs. We realized that if we lowered the prices to the level of the competitor, we would generate a loss; therefore, there needed to be another solution.

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