In a context of inflationary pressure, rising wages, price tensions, and labor shortages, many leaders of SMEs and family businesses are wondering how to regain some breathing room in their margins.
Should we cut costs? Review our prices? Change our model? It's hard to see clearly when the daily urgencies take up all the space, or when certain management practices that are sometimes too traditional or too intuitive limit the fields of possibility.
And yet, improving margins without damaging the business or the engagement of the teams is entirely possible. It is essential to avoid certain common pitfalls... and to dare to look beyond the rearview mirror.
Here are 10 pitfalls that we often encounter in the field — and just as many opportunities for improvement that SAYGODO helps to realize :
1️A pricing policy disconnected from perceived value
Too many companies still set their prices based on a cost-based logic, adding a "reasonable" margin. This opens the door to fruitless negotiations—sometimes in open book mode—where the client and supplier argue over what constitutes an "acceptable" margin.
Others blindly align themselves with the competition, without questioning the actual value created for their clients.
The way forward: value-based pricing. A price should reflect the value perceived by the customer, based on elements such as :
- a lower TCO (Total Cost of Ownership),
- a quick payback or a higher NPVé,
- better uptime, increased reliability,
- ease, safety, or user comfort,
- or the quality of peripheral services: stock, warranty, speed of intervention, support…
The right price is not the one that seems fair internally. It is the one that accurately reflects the value delivered to the customer..
2️A cost structure that is poorly understood... therefore poorly managed
Too many companies do not have a clear understanding of their cost structure. Yet, you cannot improve what you do not understand..
The goal is not absolute precision, but the creation of a standard cost, with :
- the major inputs (materials, labor, energy, depreciation, etc.),
- orders of magnitude (%),
- a regular monitoring of discrepancies,
- a continuous improvement approach relative to a benchmark (= the standard cost).
Excessive cost volatility (high variance and/or frequent variance compared to the standard cost(s)) is often a sign of a failing process. It is therefore essential to :
- assign responsibilities to each major position,
- visualize the cost cascade to better mobilize the teams,
- prioritize initiatives and measures that reduce cost volatility, as they often also structurally improve margin levels.
3️A range that is too broad... or too narrow
A wide range gives an impression of flexibility... but often leads to :
- more complex stocks,
- a surge of references to manage in the systems,
- a heavy customer service,
- increased risk of errors.
On the contrary, a narrow range allows for focus, simplicity, clarity. But it demands :
- a strong differentiating value,
- a perfect mastery of the core business.
The right range width depends on :
- your key skills,
- your operational agility,
- the competitive dynamics,
- and customer expectations.
4️Poorly analyzed profitability... therefore poorly managed
Too many leaders are still managing based on overall gross margin. But not all customers are equal. Not all products are either..
It is necessary therefore :
- analyze the margin by range and segment,
- break down the margin (isolate the effects of price / volume / mix / cost),
- detect quick wins,
- identify structural improvement areas.
And above all: Do not hide the margin or at least the contribution of the commercial margin to the sales force. Measuring and informing is raising awareness and holding accountable.
5️An ineffective value chain because it is endured rather than managed
Raising orders in timing, volume, or specifications = guaranteed chaos.
An adapted S&OP process (even for a company active in services) allows for anticipating, smoothing, and structuring the stages of purchasing/sourcing, production, transformation/service delivery, and distribution..
For each link in the chain, manage with KPIs :
- Cost
- Quality
- Time
Involve operators in continuous improvement. They see what Excel spreadsheets overlook. And regularly rethink your value chain. :
- What creates value = to keep in-house.
- What doesn't do it = to challenge or outsource.
6️A siloed organization that undermines overall performance
An example? If each link in a production/transformation process, which has a total of 5, reaches 90% of its goal, then:
90 % × 90 % × 90 % × 90 % × 90 % = 59 % !!! is the total performance of this value chain, or of this production/transformation process.
To avoid this :
- clarify the expected inputs/outputs at each step,
- define an internal mini-SLA,
- establish alignment routines: daily, weekly, monthly.
The performance of a team or a company relies on collective fluidity, the efficiency and clarity of interfaces, and of course, on individual performance..
7️An implicit tolerance for "small deviations" that is costly
“It’s not a big deal” = one of the most costly phrases in business...
1% of deviation on a large item = more expensive than 10% on a small one. Hence the importance:
- of a clear standard cost and its breakdown (PARETO of its components)
- of trend monitoring (and not incident monitoring),
- of a permanent link between numbers and the field.
A culture of benevolent rigor is a huge lever for performance.
8️Under-managed purchases... even though they carry significant weight
Purchasing often weighs heavily in the cost structure. Yet, they are not always handled with rigor..
To do :
- reasoned multi-sourcing,
- negotiated preferential terms,
- up-to-date and complete database of suppliers,
- win-win approach with suppliers.
And in SMEs/family businesses? Historical partners are often not challenged much. Loyalty yes, but also demands.
9️Poorly framed, poorly profitable investments
Too many investments are being decided :
- too fast,
- without competitive bidding,
- without clear indicators.
To invest wisely:
- specify the needs,
- challenge the offers,
- analyze with NPV, Payback, IRR,
- think modularity,
- consider renting or leasing as possible alternatives (flexibility, agility).
A good investment is a guided value creation, not an expensive intuition.
10 Uncontrolled growth... that ultimately kills the margin
Unanticipated growth creates tensions everywhere :
- urgent hiring,
- declining quality,
- Saturated customer service,
- overwhelmed production,
- Undersized ERP or CRM.
A healthy growth is:
- repare for tipping points
- strengthen what needs to be strengthened (teams, systems, processes)
- embrace a gradual ramp-up.
Sometimes slowing down is the fastest way forward..
And now ?
At SAYGODO, we help SME and family business leaders improve their margins by combining strategic clarity, operational discipline, and team engagement.
No miracle recipes, but a proven method to turn tensions into drivers of lasting performance.