One of the biggest mistakes many small businesses are making right now is confusing affordability with sustainability.
Across SA, SMEs are operating under immense pressure. Consumers are spending more cautiously, operational costs continue to rise, and competition is becoming tighter across almost every sector.
In response, many business owners are doing what feels necessary in the moment. They are dropping their prices to secure work.
On the surface, this seems like a practical move. A lower price can help close the deal, bring in cash and keep the business moving. But over time, underpricing creates a much bigger problem.
It weakens the business from within.
For many entrepreneurs, especially those still trying to establish themselves, pricing often becomes reactive rather than strategic.
There is a tendency to quote according to what feels acceptable to the customer, rather than what the business actually needs to remain healthy and profitable.
This is where the problem begins.
When a business consistently undercharges, it limits its own ability to grow. Margins become too thin to absorb rising costs. There is less room to invest in systems, staff, marketing or product improvement.
The firm may appear busy, but behind the scenes it is in survival mode.
This is quite common among South African SMEs.
Many founders carry hidden costs that are difficult to quantify, so they end up not being take into account — software subscriptions, transport increases, electricity disruptions, internet costs, time spent chasing payments, and the administrative burden that comes with running a business.
When these realities are not factored into pricing, business owners often end up working harder for less gain.
There is also a confidence issue at play.
Many SMEs hesitate to charge what they are worth because they fear losing clients. Some assume customers will always choose the cheapest option. Others feel pressured to undercut larger competitors.
But pricing too low can sometimes send the wrong message.
Customers often associate price with quality, professionalism and reliability. If your pricing is significantly below market value, it can raise questions about your confidence in your own offering.
The real challenge is not simply attracting customers. It is attracting the right customers while building a business that can sustain itself.
So how do we fix this?
*Eliminate guesswork
The first solution is simple but often overlooked. SMEs need to know their numbers.
Every business owner should have a clear understanding of their actual cost of delivery. This means calculating not just the obvious direct costs, but the hidden operational costs that affect sustainability.
If you do not know exactly what it costs to serve a client, your pricing will always be guesswork.
*The second is pricing according to value, not desperation.
Customers do not pay for a product or service alone. They pay for expertise, reliability, convenience and outcomes.
If your work saves them time, solves a problem or creates measurable benefit, that value should be reflected in your pricing.
*Third, SMEs need to improve how they communicate value.
Sometimes underpricing is less about the price itself and more about poor positioning. If customers do not fully understand what they are paying for, they will naturally focus only on cost.
Businesses need to explain their processes in a way that highlights their high standards and the results they deliver.
*Fourth, stop using discounts as the default growth strategy.
Discounting should be deliberate and temporary, tied to a specific objective such as market entry, customer acquisition or promotional campaigns. It should never become the business model.
*Last, SMEs need to review pricing regularly.
The market shifts constantly. Fuel costs change. Supplier prices move. Consumer behaviour evolves. A pricing structure that made sense a year ago may no longer be viable today.
SA’s small businesses are some of the most resilient in the world. They adapt, innovate and find ways to survive despite enormous challenges.
But resilience should not mean permanently operating on the edge.
If SMEs are going to grow, create jobs and contribute meaningfully to the economy, they need to move beyond survival pricing.
The businesses that will win in the long term will not necessarily be the cheapest.
They will be the ones confident enough to charge sustainably, communicate value clearly and build with the future in mind.
>creditparsans<Buzani is a business consultant, youth empowerment advocate and founding member of an award-winning SME, as well as Mdantsane entrepreneur network Kasi Konversations