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Dangers of Discounting

Put together a spreadsheet on your profit margin and realise that the less you charge the more you work – and disproportionately.

Dropping your price by 20% will mean you need to work 25% more days (assuming a $3kper day chargeout, $30k of business operating expenses and a salary of $80k). If you want more salary (say $100k), dropping the price by 20% means you’ll have to work 40% extra days to make up for a 20% drop.

So it’s bad branding, it’s bad for the bottom line and it’s bad for the lifestyle.

Instead of dropping the price, how can you add value to the project?
Can you drop the overall price but provide fewer services (e.g. get some client staff on board, outsource some administrative components).
Don’t make discounting your first port-of-call.

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