How much are you willing to discount for a sale?

Price is such a persuasive negotiating tool in a crowded market. Whatever product or service you offer to the market, no matter how unique you believe it is, there is a very strong probability that customers can find a similar product or service for sale, not so very far away, at a similar price.

To win a new customer, or to persuade an existing one to buy again, often all it takes is to drop the price a little.

In the short term this decision may reflect well on you, the business owner. Revenues will be buoyed, the team fortified by the volume of business coming through the door, and the bank balance replenished. But take note, it might not last very long.

If your gross margins are already thin, they just got thinner. The impact? You have less money available to cover your overheads.

The first time this happens it might not hurt that much, but if you keep on repeating this strategy you will generate a net loss, and draw money from your savings account to fill the gap. And when the savings run out, you may find yourself delaying payments to suppliers, or negotiating a payment plan with HMRC.

And that my friend, is the business death spiral. It all began with a desire to win or keep new business. So before you take a decision about whether to lower your prices or lose a customer you should seriously consider the long term benefits of losing that customer. You might have to make some serious concessions within the business, but that depends on how badly you want to keep it.