Are you giving money away?

Do you discount? Do you cave in as soon as someone asks for a discount? Or do you play the game of negotiating? And if so, how pokerfaced are you? Let me take you through an example of discounting that caused problems for its owner directors.

Once upon a time there was a business with a turnover of £2m and profit of £50k. The three directors were not happy as they worked long hours and didn’t get much money for all the work they did. They had done everything they could to cut their expenses but they still couldn’t make a decent living. Once they started digging deeper into what was happening they discovered that their sales team were giving discounts of over £1m. Too strong to say they felt gutted? All the sacrifices the directors had made to sustain the business without having any rewards for themselves suddenly hit home.

However they knew the rules of leadership – the buck stops with them. They didn’t sack the sales team or rant and rave. After all they weren’t measuring anything! It became really important to measure those discounts, show the team the parameters they could work to and ensure a monitoring system was put in place. Not only that they gave their team extra sales training and specifically a workshop on negotiation skills.

Equally important they also put any discounts negotiated on their sales invoices. The reason was twofold, it made it easy for their management accounts to see how they were doing but also reminded their customers about the discount. Upshot was it ensured future sales negotiations with the same customers did not start at the discounted price but at the list price.

Don’t think your team know everything, whatever part they play in your business you must make training a part of what you do and guess what, that costs money – see my future blog on getting the price right.

So don't throw money away. Ensure you have thought about your discount policy and measure it.

We're producing a booklet 13 Mistakes that Small Business Owners Unwittingly Make which includes tips about pricing and it will be out on 30th June 2011.

However if you are interested in getting the booklet email Carolann@murrayassoc.co.uk and if you register your interest by 31^st May you can get it for Free (Normal price £5.95 incl. postage & packaging).

We are also hosting our regular Aberdeen Business Growth Club in Lloyds TSB Boardroom at 33 Queens Road Aberdeen on Thursday 19th May from 9 - 11:30am. The presentation is on Knowing Your Numbers - the fastest and easiest way to understand the numbers in your business. 

If interested in this event please book asap as places are limited by emailing Carolann@murrayassoc.co.uk or book online at http://www.murrayassociates.co.uk/events.htm