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Discounts

A discount does not only cost the difference. It teaches the customer that your first figure was not the real one, and that lesson applies to every quote afterwards.

For a software-side reference alongside this discussion of pricing, labour cost, and small-business finance, Monitask has this resource.

What a discount tells them

That the price was negotiable.

Which means the next quote will be treated as an opening position, and the one after that. A firm that discounts once has changed how it is read permanently by that customer.

And it tells them something about the value. A price that falls when questioned suggests the original figure was not calculated, and a calculated price is what makes a higher number acceptable.

The four that are worth giving

For scope. A cheaper version with less in it is not a discount at all — it is a different proposition, honestly priced, and it puts the decision where it belongs.

For terms. Payment up front or on completion rather than at thirty days is worth something real, and trading price for terms is a genuine exchange rather than a concession.

For volume or commitment. Several jobs, a series, a contract. The reduction reflects lower cost per job, which is true rather than generous.

And for timing. Work in a quiet week costs you less than work you have to fit in, and pricing accordingly is a legitimate use of capacity.

Each of these is an exchange. What is not worth giving is a reduction for nothing, which is the kind people mean when they say discount.

The alternative to cutting

Change the scope, not the number.

"I can get it to £1,500 by leaving out the making good — you'd arrange that separately."

The customer gets the price they wanted, you get a job that still works, and nobody has learned that your figures move.

Or add rather than subtract. Where a reduction is unavoidable, attach something to it: payment on completion instead of thirty days, a longer window to do the work, materials supplied by them.

Something for something, always.

The early payment discount

A special case, and it is a fee by another name.

Two per cent for seven days rather than thirty is a high annualised rate and it is worth doing where the alternative is more expensive.

The failure is offering it by default. A discount available on every invoice becomes the price, and the customers who were always going to pay on time take it too — which means you have reduced your prices and changed nothing about the slow payers.

Offer it selectively, to the customers whose speed you want to change, and withdraw it when the behaviour has changed.

When somebody asks

Ask what they are comparing to.

Frequently the answer is another quote with a different scope, and a precise description is what makes the comparison visible.

Where it is a genuine budget constraint, the scope conversation is the honest one and it frequently produces a job both parties are happy with.

And where somebody is simply trying it on, a straight answer works: "That's the price for the work described — I can do a smaller version if the budget's fixed."

No defensiveness, no justification of the figure, and no reduction to avoid an uncomfortable moment.

The discount you already gave

Most small firms discount without noticing, and it is not called a discount.

Unbilled variations. A quote rounded down to a comfortable number. The extra half-day absorbed into a fixed price. The return visit not charged for.

Each of these is a reduction given after the fact, with no exchange and no acknowledgement, and together they are usually larger than any discount the firm would agree to at quoting stage.

Which makes the arithmetic uncomfortable: a firm that refuses a five per cent discount on principle and then absorbs eight per cent in unbilled work has discounted more, invisibly, and got nothing for it.

What to do about a customer who always asks

Price accordingly, once, and stop having the conversation.

A customer who negotiates every quote is a customer whose quotes should start higher, so that the reduction they extract lands where you needed to be.

This is common practice and it is not deceitful — it is pricing for a known cost of doing business with that customer, which is the same reasoning as any other risk.

The alternative is holding firm every time, which works and consumes an argument per job.

Discounting to win the first job

Defensible once, with a condition.

Say it is an introductory price and say what the normal one is. "That's £1,500 for the first job — normal rate would be £1,750."

Without that sentence the introductory price is simply your price, and raising it later is a conversation you created for yourself.

And be prepared to lose them at the second job. Some customers are only ever buying the introductory price, and finding that out on job two is cheaper than on job five.

Where a discount is actually a price cut

If you find yourself giving the same reduction repeatedly, it is not a discount — it is your price.

A firm that quotes £1,800 and settles at £1,650 four times out of five has a price of £1,650, and the first figure is doing nothing except adding a negotiation to every job.

Either hold the higher number and accept the losses, or quote the real one and stop the theatre. Both are defensible; the middle position is the one that costs time on every enquiry.

The short version

A discount costs the difference and teaches the customer that your first figure was not the real one
Four worth giving: for reduced scope, for better terms, for volume or commitment, and for timing that suits your capacity
Each of those is an exchange; a reduction for nothing is the kind people mean by discount
The alternative is changing the scope rather than the number, which gives the customer the price without the lesson
An early payment discount offered by default becomes the price, and the punctual customers take it too
When asked, find out what they are comparing to, then offer a smaller version rather than a lower price for the same work

For broader background on pricing, labour cost, and small-business finance, see U.S. Chamber of Commerce.