Hey there, my fabulous listener, welcome to episode 218 of the Small Business Made Simple Podcast. 

Thank you for lending me your ears today – I know you have lots of choices, so I sincerely appreciate me being one of them!

If you’re enjoying this podcast – I’d love you to take a screen shot and share it on your socials and tag me in it.  How cool would that be!

Don’t forget you can get the show notes for this podcast at www.socialmediaandmarketing.com.au/218

Before I get started on today’s episode – how did you go with last week’s episode? Episode 218? I chatted with Nicola BZ all about web 3, NFTs, future tech and so much more! If you didn’t listen into that one – then once you are finished here – slip back there for even more small business made simple GOLD!

Ok, onto today’s episode.

To discount or not to discount – that’s the question!

Some small business owners, maybe you or maybe not you but definitely been me in the past, use sales (discounts) to increase cash flow.

For example, you are having a quiet month and you think, I’ll have a sale, I’ll give 20% off and start the cash rolling in.

It makes logical sense and I know in my retail days it was definitely a strategy that worked.

But what’s the real cost to your business and to your profitability – that’s what I wanted to chat about on this episode.

Is discounting a good thing or a bad thing?

Clearly the answer is going to lay somewhere in the middle.

As this episode goes live, it’s going to be Black Friday.

The sale I have an absolute love hate relationship with.

I love it as a consumer – there are things like Lego and perfume that always make it on to my Black Friday list of things to buy.

I hate it because it decimates small business.  It’s a day for big business mostly and small business, which can’t really afford to discount, does to keep up and then lose profit in the most profitable time of the year.

I like it because this year I am contributing to it – it’s a great excuse to launch my 2023 Women in Business (not so business) retreat and offer an early bird price.  If you’re interested in that, then head to my socials or email me jenn@jenndonovan.com.au and I can send you some more information!

And again, I hate it because it’s adding pressure to business – small business – which they don’t need.

And on this, can I say, the BIG corporates, the BIG guys I purchased from last year – my parcels arrived in the nick of time for Christmas – a few Christmas week but the small businesses I purchased off – parcels arrived the next week mostly – so super fast and efficient – again something to think about when buying in the Black Friday sales.

But, alas, I digress. 

I really wanted to talk about discounting and whether it’s a good thing or not.

And again, the answer is yes and no.

And although that’s a cope out – understanding what discounting does to your business is the point I want to make.

I know podcasting is not a good medium to try and show you something – but if you head to the show notes – www.socialmediaandmarketing.com.au/218 you will see a discounting graph and it’s that graph we are going to chat about.

What it means for your business, the damage discounting does and the mindset you need if you are going to discount (oh and the marketing you are going to have to do!).

So, let me explain the graph – because you can’t see it yet!

It’s a table and on the left hand side it says “if you cut your prices by ….” and has percentages – so for example if you cut your prices by 5%, 10%, 20% and so on.

Across the top it says “and your present gross margin (%) is xx – you need to increase your volume by …” and again it has percentages running across the top.

But, look you don’t really need to see the graph to get the context of what I am about to explain.

The graph basically says if your GM (gross margin) is, for example, 40% and you are offering your items/services on sale for 15% off – you need to sell 60% products or services than you would if you didn’t have a sale.

That’s a lot, isn’t it?

If you offer 15% off your products or services, you have to sell 60% more than you would on any other given day or week – however long the discount goes for.

When I was in retail, we used to have 20% off sales a few times a year and when I was introduced to this graph, it didn’t make us go on sale any less, but it certainly did make us think about the marketing we would need to do to increase our sales by 50% more.  Our GP was 60% and the sale was 20% off – which according to the graph means we had to sell twice as much!

Of course if you need to sell twice as much, you need to do some great marketing – and sometimes paid marketing – which means you have to sell even more because you have marketing expenses to cover.

So, there’s many lessons in this short podcast – here’s the main ones

1. Do you know what your GP is – of the price you are selling x product or service for – what’s profit and what’s covering expenses
2. Where is your breakeven point – at what price does your item/service cover it’s costs – fixed and variable,
3. If you are going to discount – how are you going to get the traffic to your store – bricks and mortar or online – to sell x amount more – depending on the discount amount – but let’s say somewhere between 50 and 60 per cent more than normal PS – you probably need to know what normal is too!

Discounting for most of us comes from the pressure to compete – like Black Friday, Boxing Day sales and so forth.  And it is good for cash flow if you need it.

But there is a true cost to your profitability – and it’s not always good.

Marketing takes work to get sales – we all know that but to discount, you need to make sure you have the budget and the time to upscale your marketing to get the increase in the amount of sales you need.

So my wish for you, no matter what your business is, is that you take away from this podcast the idea that discounting is NOT bad BUT if you do discount you are going to have really dig into your marketing strategy and up that to get the extra sales you need.

Of course some extra sales will come naturally purely because the product/service is cheaper – but others you will have to work hard for.

And if you aren’t prepared to work heard – don’t discount!  Simple!  You probably won’t be any better off if you offer and discount and just sit there waiting for people to buy!

Got ideas or questions?  Sing out.

I’d love your feedback and thoughts- head to my Facebook group Like Minded Business Owners or DM me on Instagram or LinkedIn or email jenn@jenndonovan.com.au – I’d love to know your thoughts on what are big futurist topics.

As always, if you want to chat about your profit margins, how to market better when you are on sale or  how to have a awesomely profitable business without discounting – book a discovery call with me http://bit.ly/Discoverwithjenn and let’s do that together.

Otherwise, let’s chat in my Facebook group – Like Minded Business Owners.  If you’re not a member, come join!

See you next week on the podcast for episode 219!

But in the meantime, let’s hang out on social and get social on social – you’ll find me on Instagram, Facebook and my fav LinkedIn.

Oh and before I go, do you have a subject you’d like me to chat about on the podcast or a guest I should interview?  Please get in touch – DM me, or email jenn@jenndonovan.com.au – thank you!

But whatever you do,

……..remember small business peeps, as my opening song says, there’s no point in dreaming small!