Discounting that eats your margin, and how to hold a price

A discount is not a sales technique. It is a change to your price, given away permanently in exchange for something that may turn out to be worth nothing. The reason it feels different on the day is that the customer is in front of you asking, and it is very hard to say no to somebody who is being polite about it.

Why does one discount keep costing money after the job is done?

• The customer now believes your work is worth the lower number, and they will remember it next time.
• They tell other people. The discount becomes your price, for everyone who hears it, in a market you cannot correct.
• Your staff find out that a discount was available, because it was. The next request is easier, and the one after that is easier still.
• If it was a percentage, the next customer asks for the same percentage, and there is no version of that conversation where you can say it was only ever a one-off.
• You paid the full cost of doing the work, so the loss is real margin, not an opportunity. It is already gone.

What is your floor price, and how do you work it out?

The floor is the price below which the job is not worth doing. It comes from your own costs, and it is a number you can defend without emotion.

Money you can afford to spend on the job = your price × (1 - your target margin)

Everything you will spend on the job has to fit inside that number. Materials, sub-contractors, travel and fuel, consumables, card or bank charges, and the slice of your own time that is not quoted. If the total does not fit, the price is below your floor, and no amount of goodwill on the day changes that.

If you cannot yet name your real costs for a job type, do the count. Take the last three jobs of that type and add up the invoices, the sub-contractor payments, the fuel, the consumables and the hours at your own rate. That total is your real cost. It is the only number that has any business setting a floor, and it is a number only you can produce.

The job that loses you money is rarely the one you discounted. It is the next one you quoted at the same reduced number because you had already given the first one away.

Should you discount by percentage, or concede something specific?

A percentage feels generous and is often not. Ten per cent off a large job is real money, and ten per cent off a small job is a gesture that costs almost nothing and does not change the customer's decision. Either way, the percentage chooses what you give away, in proportion to a number the customer set.

A fixed concession is better, because you choose. Reduce the price by a specific rand amount, and take something back. Now the concession is a trade, and the trade can be written down.

Never do both. A percentage discount plus a free extra plus a later start is three discounts stacked into one, and by the time the customer has finished negotiating you have no idea which one actually won the job.

What can you trade for a lower price that costs you nothing?

Most of what a customer asks for is not really a price reduction. It is a request to be handled differently, and being handled differently is often free.

Read the last column again. Every one of those concessions is free to you, and several of them are better than a discount would have been, because they cost nothing and they still get the job done.

What happens when a discount never comes back off?

This is the part that quietly costs the most, and it is invisible in the month it happens.

• A customer who paid eight thousand instead of nine thousand now has a reference point. When you quote the next job in the same house, that is the number in the room, whatever your sheet says.
• The referral goes to a friend, and the friend now knows your price as well as your name.
• Your own team sees the pattern and stops believing the price on the quote, which is the fastest way to a business where nobody is actually pricing anything.
• Nobody ever decides to take the discount back, because the job is finished and there is no mechanism for it.

A discount is not a discount. It is a new list price, with less money in it.

How should your team answer a request for a discount?

Give them a sentence they can say out loud without thinking, and make it the only one. Something like this:

Thanks for asking — on this scope the price is [price], and I cannot
go much below that.

What I can do is this. If you [pay on completion / give me the slot on
the date / let me use you as a reference / take all three jobs as one],
I will do it for [concession price].

If neither works, I would rather do it properly at the full price than
do it badly at the lower one. Which would you prefer?

The last line is doing the work. It moves the conversation off the number and onto whether they actually want the job, and it gives a customer who is genuinely price-sensitive a face-saving way to take the full price. Many of them will. Being able to say yes to the customer is worth more than the five per cent.

What your team should never do

• Never say "let me check with my manager" unless there is a manager and a real number attached. That phrase costs you the job.
• Never invent a discount that was not on the approved list.
• Never apologise for the price. Apologising for it tells the customer it was wrong.
• Never discount because the customer is being pleasant, however pleasant they are.

Say the price, then stop talking. The silence after a number is uncomfortable for about three seconds and then it is over.

Who should be allowed to change a price, and when?

Pick one person, or nobody. Then write the rules down.

• The person who takes the first call has no authority to change a price. None at all.
• Any concession must be one of the approved swaps, not an improvised amount.
• One concession per customer, per job. There is no second attempt, however sympathetic the story.
• Every concession is recorded against the job with the reason and the amount, so at the end of the year you can see what they cost.
• A discount offered to revive a customer who has gone quiet is not a discount. It is paying twice for the same job, once in margin and once in dignity.

Where do you start?

1. Take your last twenty won jobs and calculate the margin on each. Find the ones that sat at the bottom.
2. Write your floor price for your three most common job types, using real costs from your own records.
3. Print the swap table and put it where the phones are. A concession that is not written down will not be offered consistently.
4. Decide who, if anyone, can change a price, and tell your team.
5. Add a reason field to your quote and job records, so every concession is traceable.

The companion checklist audits the concessions you have already given, and the templates include a concession-for-price swap table, a floor-price worksheet, a concession log and a script card for the phone.

Not sure where to start? Book a free 30-minute strategy session and we will name the one gap worth fixing first: https://agentcy.co.za/#book-audit