The real cost of discounting your prices (and why it’s killing your margins)
The Real Cost of Discounting Your Prices
When cash flow slows down, offering a quick discount feels like an easy win. It locks in work and gets money moving through the bank.
Except discounting is usually a trap.
The Maths Behind the Slash
Discounting does not just trim your top line. It guts your profit.
Your fixed costs like rent, software, wages and insurance do not shrink because you charged 20% less. Those stay fixed. Every dollar you cut comes straight out of net profit.
If your profit margin sits at 30% and you offer a 15% discount, you have halved your profit. To make that back, you now need double the work for the exact same return.
Cheap Clients Cost More
Clients who hire you because you were cheap are always the hardest to manage.
They generally don’t value the expertise. They value the bargain. They often keep expanding the agreed scope of works, demand endless changes and take months to pay an invoice. Clients who pay full price usually respect your time and value the result.
What to Do Instead
When a prospect pushes back on price, hold your ground:
Reduce the scope: If their budget is tight, pull back deliverables to fit what they can afford. Never give full service for less money.
Throw in low cost value: Add a quick operational extra that costs you minimal time or cash instead of cutting the bill.
Walk away: Let bottom dollar clients go to your competitors.
Holding your rates during a quiet stretch takes guts, but tight margins keep your business alive. Let someone else race to the bottom.
Share this with a fellow business owner who needs to stop cutting their prices to win jobs.
This information is intended to be general in nature and is not personal financial advice. It does not take into account your objectives, financial situation or needs. Before acting on any information, you should consider the appropriateness of the information provided in relation to your own circumstances.
