I once saw a friend of mine nearly destroy his business before it got out of its first year. It wasn’t because of reckless spending, poor marketing, or any of the common reasons you might think of when it comes to businesses failing. In fact, I think he made a mistake that’s actually quite common across every industry.
Want to know what he did?
He created a race to the bottom. Or in other words, he started a price war. Before he ever began selling his product, he went and researched what competitors in his area were charging. Instead of trying to differentiate and charge more (his product is objectively better), he decided that the smart move was to undercut their prices in hopes of stealing customers.
But his big mistake was that while he was charging less, his costs were also higher than the competition due to the quality of materials and labor he needed. He started out with a minimal margin, and eventually realized he was bleeding money when production backed up even by an hour.
For the next year, he had to dig himself out of a hole that cost him half his clients and potentially years of profitability.
This story is a fairly drastic example of how a race to the bottom
Source: https://managewp.org/articles/17482/wordpress-business-owners-how-a-race-to-the-bottom-hurts-your-business-s-bottom-line
source https://williechiu40.wordpress.com/2018/05/28/wordpress-business-owners-how-a-race-to-the-bottom-hurts-your-businesss-bottom-line/
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