Do you feel nervous, anxious, or worried every time you give a discount, trade, or comp in your business because you’re not sure your finances can handle it? Are discounts slowing sucking the life out of your business?
Most small business owners are giving too much away! However, that doesn’t mean you can’t or shouldn’t give things away. It means you have to be more intentional about your boundaries.
I’m sharing how to give out discounts, trades, and comps in your business WITHOUT going broke or sacrificing your financial self-care. When done correctly, giving out discounts, trades, and comps should feel GOOD, not draining.
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Types of Discounts (3:30)
Here’s the deal… Many small business owners aren’t placing proper boundaries around their trades, especially when they first start doing business. When they don’t set limits, they give too much away. Does that sound like you?
It’s all about intentionality.
Discounts come in all sorts of shapes and sizes. What types of discounts can you offer?
With this discount, you’re offering to exclude a percentage amount from the overall price. Maybe you’ll provide 10% off for family, friends, or referrals. You could be celebrating a holiday or special occasion and want to offer 20% off for a limited amount of time.
Sliding Scale Discount
Sometimes people don’t think of these as discounts, but rather a part of their pricing model. A sliding scale is where you set the low end of the scale and the high end of the scale. Generally, you ask people to pay somewhere in that scale that works for their income level.
Pay What You Can
In this case, your client or customer sets the price for you and you’re inclusive of everybody’s income level. However, it’s unpredictable. With sliding scale you have a range that helps predict your cash flow- you don’t get that with pay what you can. It can be more challenging when you’re looking at your business from a cash flow perspective.
Comps / No Fee
Basically, you’re giving away something for free, which is still considered a discount! The comps / no fee approach is one of the discounts we’ll be discussing in greater detail.
Trades / Barter
This is where you and somebody else have something that you each want from each other, and you trade your products or services for what the other person has to offer. It’s also known as an equal trade.
Those are the different types of discounts that people tend to give out into their business. Now it’s time to go over the steps toward giving away discounts!
Giving Discounts (6:39)
These are the steps small business owners should take to ensure that they’re not overgiving, they’re setting clear boundaries about their discounts, and that they have a discount policy. When you have a policy, it’s way easier to say yes or no to a discount request without spiraling into shame or guilt!
Step 1: What you will discount? (7:17)
Before you give out any discounts decide WHAT you’re going to discount. Look at all of your products and services. Then determine which ones you’re willing to discount. It’s okay if you don’t want to discount everything!
There may be products or services that you don’t want to discount because of the amount of time and effort that it takes you to do. It’s much easier to respond to a discount request when you know ahead of time what you are and aren’t willing to discount.
Here are some questions to ask yourself:
- How long does it take you to do the work?
- What are the costs that you incur?
- What’s your availability for taking on a client at a discounted rate?
- Do you enjoy performing the tasks that you’re discounting?
Step 2: Whom will you discount for? (9:38)
Next, decide who you’re going to give discounts to. What are your criteria for giving out a discount? Will you only give discounts to family and friends? Casual acquaintances? People you connect with on Facebook? Client referrals? New business owners?
Before you start giving out discounts ask yourself: what are the circumstances in which I’m willing to give a discount? I can’t tell you what those circumstances will be because it all depends on your values. You can refer to my blog post on money values to understand what I’m talking about here.
Step 3: What is the discount? (11:28)
Next, decide what the discount is going to be for each product and service that you will discount. What is the discount you’re willing to give? This can be a percentage or this can be a dollar amount.
Look at the people you are willing to give discounts to from the previous step. What discount will each group receive? Lean into your money values and ask yourself who gets a significant discount and who gets a minor discount.
Step 4: How many discounts will you give? (12:13)
This is the step where you get intentional. You will decide if, when, and how you’re going to offer discounts. Start with a total amount of discounts you’re willing to give out throughout the year and break that down into each product and service that you’re willing to discount.
This is SUPER important because this is where you stop draining your business finances by giving out too many discounts.
Step 5: Make a discount budget and keep track (13:32)
Now it’s time to make a discount budget and keep track of your discount. A discount budget is a budget that helps you set boundaries around how many discounts you’re going to give out per year. It enables you to keep track of that so you don’t go over your boundaries. Watch me go over the free spreadsheet at 15:13 in the video.
We talked about the steps to decide how many discounts you’re going to give, now let’s to dive into the best practices. As you are giving out discounts, what are the best practices to ensure that you’re not shaking up your financial foundation?
BEST PRACTICE: Consult your discount budget before saying yes.
Knowing that you discount budget is maxed out BEFORE responding to a discount request makes it easier to say no with integrity. Let’s be real, we hate telling people no, and checking your budget helps you say no based on boundaries you already set for your business.
BEST PRACTICE: Divide discount budget into time periods (like quarterly).
If you have an annual discount budget, use quarterly milestones to spread your discounts out over several months. This way, if someone asks for a discount in the first quarter of the year, and you say no, you can tell them to check back in a few months.
BEST PRACTICE: Write a canned response stating your discount policy.
Having a designated response makes it easier to say no to people when they ask you for a discount. Create your discount policy, and then write a canned response that explains to people why you can’t offer a discount.
Just like discounts, when accepting trades there are a series of steps you should take to ensure you’re not agreeing to trades impulsively or getting overworked by too many trades!
Step 1: What costs will you incur? (25:20)
When you’re doing a trade, you’re not getting paid. Because of that, you need to look at your costs. Will you incur costs to complete the work or fulfill the contract? Will you have to provide any supplies? If you don’t want to incur those costs, you need to be explicit with the people you’re trading with that those costs are not covered.
Step 2: What paid time will be lost? (27:48)
Consider the value of your time and how much time you’ll lose in your business by performing a trade. How many clients or paid customers will you turn down during the time that you’re trading? Will you be losing self-care time? Time spent during a trade is still work, whether you’re paid for it or not.
Be honest, and ask yourself, Is my business income going to suffer? Will my personal time and self-care get neglected?
Step 3: Is there any part you don’t want to trade? (29:26)
There may be aspects of a service that you’re not willing to trade. I’ll give you an example: for one of my services I’m willing to trade everything but the actual bookkeeping work. I know the time and energy it takes me, so I don’t want to do that on a trade.
Understand what parts of your service you feel are tradable and which parts are a big time-suck.
Step 4: What are you willing to trade for? (30:29)
Make a list of all of the things you’re willing to trade for. Don’t just accept trades because they come your way. Think about the things you need before the stuff you want. Impulse trading is a thing just like impulse buying!
BEST PRACTICE: Check your cash flow first.
Do you have enough money to cover the costs of this trade? If you don’t, then you shouldn’t be trading. Can you afford to do this if you’re losing clients spots? Will you lose paid work as a result of this trade? Look at your upcoming bills and overhead expenses to make the determination to trade or not.
Getting something for free does not pay your business bills or your personal bills. Be sure that your business cash flow can sustain a trade.
BEST PRACTICE: Write a contract.
If you’re trading with somebody, you should have a contract. In the contract, be explicit about what you’re trading for. The contract should say what one person’s giving and what the other person’s receiving.
BEST PRACTICE: Track trade amounts.
Don’t assume that the person you’re trading with is tracking their trade amounts. Every time the person you’re trading with performs a service for you, ask them what the value of the service. Then you write it down! You’re also going to be tracking the amount of your time.
BEST PRACTICE: Send regular trade updates.
Share the time and value of your trade with the other person regularly. If it’s a package trade, you’ll know the dollar value. If you’re performing hourly work, track that with a time tracker and send the reported hours on a regular basis. This way, you’re showing your partner the value of the work you have left.
Don’t think of it as being pushy or mean. You’re not telling the other person, “Hey, you still owe me this amount of work!” You’re saying to them that this is the work you’ve done so far, and this is what it’s worth. It’ll honestly build a better relationship between you and the person you’re working with.
Comp / No Fee (40:08)
This is when you’re willing to provide a service or product for free. It’s on a whole different level from the other discounts because it ties into your money values.
When you’re giving a discount, you’re still getting paid in some way. When you’re making a trade, you’re still getting something back. It might be for your business, it might be personal service, but in some way, you’re getting something back. However, with a comp / no fee, you don’t receive anything tangible, which is why this type of discount is rooted in your money values.
Step 1: What are your money values? (40:21)
Why you comp something will have a lot to do with your values and what’s important to you. Looking at your money values and knowing exactly why you offer work for free will help you feel clear and intentional about that choice.
Your values may change over time and that’s okay. What’s important to you right now may not be something you’re passionate about two years from now. The point is, you’re giving out a comp for a reason. That reason should matter to you.
Step 2: What costs will you incur? (42:47)
Just because someone else isn’t paying for something doesn’t mean you’re not incurring costs. With a comp, you’re not asking the other person to pay for anything, so you need to make sure that you can, and are willing to, cover the costs.
Step 3: What are your monthly overhead expenses? (43:16)
Think about what will happen to your business financially if you give something away for free. Whether it’s your time or money, comping may impact your ability to cover your overhead expenses. How much does it cost you to run your business every month? Can you afford to cover your costs and work for free?
For example, you have three clients who are full-fee payers but you need five to sustain your business. If that’s the case, then offering a comp isn’t a good idea. However, if you have five or even seven full-fee payers, and there’s room in your schedule, then you can certainly offer a comp without worrying about your overhead costs.
Step 4: What paid time will be lost? (44:28)
What is the value of the time that you’ll lose in your business? How many paid client spots are you’re losing? Are you losing personal self-care time? I want to stress that because most of us forget to factor in our own time into the equation.
BEST PRACTICE: Write a contract.
You want to be completely explicit about what services or products you’re comping. Write everything out in a contract and have the other person sign it. This way, the other person will know exactly what they can and can’t ask you for.
BEST PRACTICE: Don’t comp late and no-show fees.
Sometimes when people aren’t paying for something they don’t hold themselves accountable. Keep your late and no-show fees in your contract. If you leave them out, then the person you’re working with may cancel appointments or no-show because there are no consequences.
Typically, paying a lot of money for a service is what holds people accountable because people want to get their money’s worth. In this case, what’s keeping people accountable are these late fees.
BEST PRACTICE: Post your no-fee policy publicly.
You don’t have to do this, but it’s a good idea if you receive a lot of comp requests.
BEST PRACTICE: Redirect people you won’t comp to your discount policy.
You may have something that you’re not willing to comp, but you’re willing to offer a 20% discount. In this case, let them know that they don’t fit the criteria for a no-fee, but they do meet the requirements for a 20% discount. This helps you stick to your boundaries and say no without guilt.
I’ve talked a lot about making a discount budget to keep your discounts, trades and comps in check. I’ve created a FREE discount budget spreadsheet to help you set your discount giving financial boundaries. Download the free spreadsheet below and don’t forget to watch the video demo at 15:13 in the video!