The temptation is strongest when you're scared I've watched this play out dozens of times. Someone's been running their business for a year or two, things are ticking along, and then they notice a competitor undercut them. Or a big client mentions they could get the same thing elsewhere for less. The instinct is immediate: lower the price, match the market, stay in the game. It's the wrong instinct most of the time. Right now, with the uncertainty around energy costs and supply chains, I'm seeing more of this panic pricing than usual. Tesco's already warning that profits could fall. Private landlords are cutting rents for the first time in years just to fill vacancies. There's real pressure out there. But panic cuts your margins in half and solves nothing if the real problem isn't your price. Figure out if price is actually the problem Here's what I tell people: before you touch your pricing, you need to know why you're losing deals. Is it genuinely because someone else is cheaper? Or is it because your sales process is weak, your product positioning is fuzzy, or you're chasing customers who were never going to value what you do anyway? I worked with a service business last year who thought they needed to cut prices by 15%. They were losing bids left and right. Turned out their pitch deck was confusing, their website didn't explain what made them different, and they were competing on price because they'd never given anyone a reason to compete on anything else. We fixed the messaging first. They raised prices instead, and revenue went up 23% within four months. So before you move, ask yourself three things. One: are you losing to direct price comparison, or are you losing because prospects don't understand your value? Two: what's your actual cost structure? Can you survive a 10% price cut and still invest in the business? Three: if you cut prices, will those new customers actually stick around, or are they the type who'll jump ship the second someone cheaper comes along? Your margins are your oxygen This one's non-negotiable. Every pound you cut from your price is a pound that doesn't go into product development, marketing, or keeping yourself sane through the quiet months. I've seen people cut prices to grab market share and then realise six months later they can't afford to service what they've sold. Think about your unit economics properly. If you're selling something for £500 and your cost is £300, you've got £200 to cover overheads, tax, and profit. If you cut to £450, you're down to £150. That's a 25% hit to your actual usable money. Most businesses can't absorb that without something breaking. The worst version of this is when you cut prices but don't tell your team. Suddenly they're working harder for less reward, and morale tanks. I've seen that kill small teams from the inside out. When cutting prices actually makes sense There are legitimate reasons to cut. If you've genuinely overpriced relative to the market and you're getting consistent feedback about it, then yes, you need to move. If you're sitting with excess capacity and you could fill it with profitable work at a slightly lower rate, that's different from panic cutting. If a strategic customer could become a long-term anchor client at a lower price, that math might work. But these decisions need calculation, not emotion. Work out the volume you'd need at the lower price to match your current revenue. If you'd need 50% more customers to break even, and you don't have a way to get those customers, then cutting prices doesn't solve your problem. It just makes it worse, slower. I'd rather you raise prices to the right customers than lower them to the wrong ones. This matters even more with supply chain uncertainty and energy shocks squeezing everyone. If you're one of the few businesses in your space running efficiently, that's worth premium pricing, not discounting. What you should do instead If competition is tightening and you're worried about losing business, the first move isn't pricing. It's clarity. Get specific about who actually values what you do and why. It's not everyone. If you're trying to serve everyone at a discount, you'll end up serving no one profitably. Second, look at what you can actually control. Your delivery speed. Your customer service. Your product quality. The experience of working with you. These don't require you to cut margins. They require you to be better. Third, if you do decide to adjust pricing, do it strategically. Create a new tier or offering at a lower price point rather than cutting your existing offer across the board. That way, you're not devaluing what you already have. You're just creating a different option for a different customer. What to do this week Monday morning, pull together your last five lost deals. Write down why you lost each one. Was it price, or was it something else? Don't guess. Actually look at what the prospect said or what the feedback was. Then calculate your gross margin on your three biggest revenue sources. Know that number exactly. By Wednesday, if you're still thinking about cutting prices, talk to three customers who actually buy from you. Ask them why they chose you and whether they'd still buy if you raised prices 10%. Their answers will tell you everything you need to know.