Discounts feel small because they are quoted as percentages of price. Their real effect lands on margin, which is a much smaller number.
The arithmetic that surprises people
Say a job is worth Rs 1,00,000 and costs you Rs 70,000 to deliver. Your profit is Rs 30,000.
Give a 10% discount. Revenue drops to Rs 90,000, but your cost does not move. Profit is now Rs 20,000, you gave away 10% of the price and a third of the profit.
At a 20% margin, that same 10% discount removes half your profit. This is why "just give them 10%" is never as small a decision as it sounds in the room.
Discounting to win volume rarely works
The usual justification is that a lower price wins more work and volume makes up for it. In a service business, where capacity is your team's time, that logic mostly fails: more work at a lower margin means the same people working harder for less profit, until quality slips.
Give something other than price
When a client pushes on price, they are usually pushing on value, terms, or risk. Alternatives that cost you far less than margin:
- Better payment terms: often what they actually wanted.
- A reduced scope at the reduced price: the honest version of a discount, and it protects the value of your full offer.
- A small extra that is cheap for you and useful to them.
- Priority scheduling: costs nothing, matters a lot to some clients.
If you do discount, get something back
Never give a discount for free. Trade it: a longer commitment, advance payment, a referral, a testimonial. An unconditional discount teaches the client that your first price was never real.
Watch who discounts and how often
If your team can discount without approval, some will use it as the fastest route to a closed deal. Tracking discount by salesperson usually reveals that most of the margin leakage comes from a small number of people and a small number of deals, which makes it a very fixable problem.
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