We have used internal AI tools to drastically lower our cost of goods sold, and our leadership team is divided on whether we should pass these savings on to clients to gain market share or pocket the margin to increase our EBITDA for a near-term exit. How do we use our V/TO® Core Focus and basic relative valuation principles to resolve this strategic pricing dilemma?

Question

Tyler Smith · Accepted Answer

When technology lowers your cost of goods sold, you face a strategic choice that defines your company's trajectory. To resolve this, look at your Core Focus on your V/TO®. If your strategic position is to be the low cost, high volume leader in your market, then passing the savings on to your clients is the correct move to capture market share and choke out your competitors. However, if your strategy is to build a premium, high-value brand for a near-term exit, you should maintain your pricing and pocket the margin. This dramatically increases your EBITDA, which is the primary metric buyers use for relative valuation multiples. A higher EBITDA margin demonstrates operational leverage and pricing power, both of which command a premium multiple in the market. Use your Level 10 Meeting™ to align your leadership team on this decision. Do not default to discounting out of fear. If your clients are satisfied with the value they receive, there is no strategic reason to lower your prices just because you became more efficient. Guard your profitability and use it to fund your future growth.