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10 Common Problems for New Businesses


7
Charging Too Little
Not everyone can be Wal-Mart. Don't set your prices too low as you're getting started.
Not everyone can be Wal-Mart. Don't set your prices too low as you're getting started.
Joe Raedle/Getty Images

One of the most common problems of new businesses is trying to beat the competition by offering lower prices. Unless you're Wal-Mart, this strategy is not going to work. And here's why.

Larger, more established companies save money by purchasing on scale. They've learned how to cut costs through longstanding relationships with suppliers and through careful logistical planning. Wal-Mart, for example, can offer low prices because it has exclusive contracts with suppliers. Suppliers give Wal-Mart rock-bottom wholesale rates because they know the multinational chain is going to buy 100 million units.

You're not so lucky. It will take time to build relationships with suppliers. And since you're starting small, you won't be able to get the lowest wholesale prices. If you try to beat Wal-Mart's retail prices, then you simply won't make any money.

The better strategy is to price your goods or services at a fair market value and try to beat the competition on high quality, customer service and your "unique selling proposition," also known as marketing [source: Krotz].