sales chartA lot of salespeople and small business owners will say they need to discount their price to get a sale.

They claim they need to do it to generate cash flow to allow them to stay in business.

I get it.

I’ve been in that same situation having owned several small businesses over the years.

The problem is trying to discern the difference between discounting your price to create cash flow versus using it as a lousy excuse to validate your inability to close a sale any other way. When you discount your price to create cash flow, you’re doing a couple of things.

First, you’re telling yourself what you’re selling is not worth full price.  Second, you’re telling your customers you can be bought at a discount; therefore, you must not be worth it.  Third, you’re taking margin out of your business both short-term and long-term.

Discounting your price to create cash flow should only be done as an absolute last resort after credit lines have been exhausted and all other forms of generating cash flow have been used up.

If you must discount your price to create cash flow, here are a couple of ways to do it:

First, only offer it to customers in a section of your market you can control and who do not have the ability to communicate the lower price they’re getting to other segments of your market.

Example:  You might offer a discount to a particular industry in a specific geographic area but only to that industry in that area.

Second, only offer it on products or services you intend to discontinue soon.  The idea here is you don’t want your customer base to believe the lower price is the new price.

Third, only offer the discounted price as a time-sensitive offer or on a specific quantity.  This one is tougher than the other two and, therefore, should be used only as a last resort.  Reason is simple — making offers of this type will set you up for customers to challenge you to offer it to them even if they don’t make the quantity or date.

Final option if you feel you have to discount you price is what I think is the best option to generate cash-flow. Offer a discount of “x” based on early payment.  Think about this. If you’re trying to generate cash flow, doesn’t it make sense to get your money earlier?

Discounting your price to generate cash flow is tricky. I only recommend it when it is absolutely necessary. If you do need to do it, make sure you have your strategy in place before you start.

Copyright 2013, Mark Hunter “The Sales Hunter.” Sales Motivation Blog.

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