Is price a powerful weapon?

Yes it is so powerful that it can kill a business.

Especially the ones that discount!

Let me give you an example. If your net profit before tax is 20% and you give a discount of 10% you are taking a significant hit on your financial bottom line. Let’s say you average sale is $5,000. So your net profit before tax is 20% of $5,000 = $1,000.

So if you give a discount of 10% on the price of $5,000 which is a $500 discount. This makes the selling price $4,500 before tax. What you have done is take $500 away from your bottom-line of your business. You have taken a 50% deduction on your net profit.

Discounting seems so innocent, just 10%, it shouldn’t have much of an effect. But as you can now see, it can be a disaster.

Instead of discounting, you need to learn how to create value for your client. By creating value for your client, they won’t be looking for discounts.

Doesn’t this make sense?