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Pricing · 4 min read
When the margin wasn't where the model said it was
The question every PE pricing thesis assumes
Most Private Equity pricing theses are built on a simple assumption: the business under-prices its product, and a more disciplined commercial team can recover the gap. That assumption is usually correct. The harder question is where the leakage actually sits, and why it has not been recovered already.
When we pulled three years of transaction history at a Private Equity-backed welding manufacturer, we found something more significant than a pricing gap. For the same product, sold to comparable customers, prices varied by up to thirty-five percent. The variation had nothing to do with volume, strategic value, or competitive pressure. It was the result of individual sales reps making discount decisions autonomously, without shared guidelines, over many years.
The pricing problem is rarely the price. It is the absence of a structure that would have made price decisions consistent in the first place. Without that structure, every rep is solving the same problem alone, and every rep is solving it differently.
Where pricing leakage actually sits in B2B
01
Rep-level discount variance
When discount authority is spread across a sales force without shared guidelines, the same product sells to comparable customers at materially different prices. The variation is structural, not strategic. It compounds over years until the gap between what the business could charge and what it actually charges becomes the largest single driver of unrealised margin.
→ Pricing Transformation case study
02
Pocket margin leakage
Freight costs silently absorbed on low-volume routes. Extended payment terms offered as relationship courtesies with no adjustment to the effective price. Return credits sitting against accounts that look profitable on gross revenue alone. None of these show on a P&L line that anyone reviews. All of them are recoverable once the pocket margin waterfall is built and the data is owned by the commercial team rather than finance.
→ Pricing Transformation case study
03
Pricing without a structural framework
Many B2B businesses set price by gut or by history rather than by a deliberate logic that links product, customer, and price point. When a structural framework does not exist, every rep negotiates from a different starting position and price discipline collapses under any commercial pressure. Building target prices, price architecture, and segmented pricing logic gives the sales team a defensible position in every conversation.
35%
price variation found on the same product sold to comparable customers
2 to 3pp
gross margin recovered and sustained after engagement close
4 waves
staged rollout across markets, starting where alignment was strongest
What good implementation looks like
We built each rep a price opportunity capture tool tailored to their own book of business. Each rep could see their own discount patterns, the suggested target price, and the revenue impact of correcting specific accounts. Personal data is much harder to dismiss than aggregate patterns, so resistance dropped quickly once the conversation moved from spreadsheet to territory.
The rollout ran across four waves over twelve months, starting in markets where alignment was strongest and using those results to bring resistant markets along progressively. The teams that had been most resistant at the start became the most vocal advocates by the end. The outcome was a two to three percentage point improvement in gross margin depending on the market, sustained after the engagement closed.
The recoverable opportunity was larger than the original investment thesis had assumed. But recovering it required changing how the entire sales organisation thought about pricing, not just correcting a spreadsheet.
What bad implementation looks like
A pricing intervention changes what people charge today. A pricing transformation changes how a commercial organisation thinks about pricing permanently. The gap between those two outcomes is almost never a data problem. It is a capability and change management problem.
The most common failure mode is to issue a new price list and assume the field will follow it. They will not. Without rep-level data showing each individual the variation in their own book, without phased rollouts that let early adopters become proof points for resistant markets, and without manager-led coaching that turns the new framework into routine practice, the price list slowly drifts back to the discount patterns it was designed to replace.
How we sequence a pricing transformation
01
Diagnose. Build the pocket margin waterfall and quantify rep-level discount variance against comparable customer sets.
02
Build the framework. Target prices, price architecture, and segmented pricing logic that holds under commercial pressure.
03
Build rep-level tools. Personal capture sheets, opportunity dashboards, and revised price books that put the data in the hands of each individual.
04
Roll out in waves. Start where alignment is strongest, use those results to bring resistant markets along.
05
Embed for sustainment. Manager-led coaching, regular tracking against the framework, and review cadence that keeps discipline intact after the consultants leave.
The short version
Pricing improvement that holds is not a price list. It is a structural framework, rep-level tools, and a wave-based rollout that builds advocacy as it goes. The companies that capture the recoverable margin tend to look the same on the way in. They look very different on the way out, because the commercial organisation has been rebuilt rather than instructed.
Working through a pricing challenge in a portfolio company?