A Gareth Bale double gave Wales a 2-1 victory over the Scots in Cardiff in October but that was their first Group A victory in a campaign which is slipping away from both countries after four fixtures.
Scotland are bottom of the group with two points ahead of Gordon Strachan's first competitive game as boss but Southall believes the win is more important to Coleman, who took over in January 2012 after the death of Gary Speed.
Speaking at Hampden Park this morning where he was helping to publicise the match, Southall said: "It is a massive game for both countries, probably more so for us.
"Strachan will be given another chance if he loses, but I think with ours it (defeat) could nail the coffin for the manager, for us financially and for the fans.
"We are really struggling to get people in the door and when you have a player like Gareth Bale I find hard to understand, so we really need to win this one.
"Personally, I wouldn't sack him but if we lose this one there will be an awful lot of people queuing up to put a knife in his back.
"I think they should give him until the end of the campaign and have a look then, or give him another year.
"At the end of the day we have a certain number of players to choose from, you need stability and you need people to put things in place and he hasn't had enough time.
"If you are in the job for a year you have players for five days over six games which is 30 days, it is really hard to build a successful business in 30 days or in 50 days.
"We need to give him a bit of time."