The impact discounting is having on your business
If your salespeople ever offer a discount or you run special discount promotions you are murdering your profit.
Its ok, just about every business we know discounts from time to time unless they have been mentored by us.
One of our clients, lets call him Frank, has a profit margin of 30%, and before we started working together, his sales team often gave a 10% discount to make the sale. This meant that Frank was loosing a massive one-third (33.33%) of the available profit!
If you are selling, or have others selling for you, you must protect your price and your margins. Sell value, perceived and real. Make a commitment right now to never discount again. Heres why...
Smart pricing can allow you to work 50% less and earn the same income from selling. You don't think its possible, you bet it is! Here's how:
Suppose your company sells pumps, with a selling price of $10,000 per unit. Assume that your net cost per pump is $7,000. This means the net profit on each pump would be $3,000 ($10,000 sell price minus $7,000 cost price). If ten pumps are sold at the full price, the net profit for your company will be $30,000 (10 pumps multiplied by $3,000 profit per pump).
Compare this with selling another ten pumps, but this time at a discount of 10%. The total selling price for ten pumps is then $90,000 (90% of $10,000 sell price, multiplied by 10 pumps). The net cost for the ten pumps remains at $70,000 (10 pumps multiplied by $7,000 cost price per pump). The net profit has decreased to only $20,000 ($90,000 sell price minus $70,000 cost price) compared to the original transaction $30,000 where no discount was given.
If your company continued to sell at ten percent discount, then you would have to sell 15 pumps to achieve a net profit of $30,000. Here's how it looks:
Sales Discount Gross Sales Net cost Profit 10 0% $100,000 $70,000 $30,000 10 10% $90,000 $70,000 $20,000 15 10% $135,000 $105,000 $30,000
Here's what this means to your business
A ten percent discount means your company must sell 50% more units (15 instead of 10) to earn the same profit dollars.
How much harder would you have to work to sell 50% more every month?
By not giving discounts, in essence the company can sell 50% less and earn the same income.
In spite of this, you might still think, but if I don't give discounts, I'll lose sales! Its an industry norm to give them...everyone does. If I don't give discounts, they'll go to the competition!
And you may be right, of course. You may lose a few deals if you don't give discounts, but the good news is you can afford to and still make the same or more profit.
If you in an industry where discounting is the norm, that is a great starting point fir us to start working together because it means that no one is leading the way with innovation, solution selling or value adding...
To find out more about how smart pricing can increase the profit in your business EMAIL US FOR A FREE COPY of the one page tool that we use with our clients to get the pricing right in their business.
Just enter your details into this site and you will receive a free copy.
The only thing that you can lose is more profit in your business
Email us now !
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