The Cash Flow Blog

It’s a rational thought — slash prices and buy customers.  Create a volume of business by deeply discounting products and services.  Margins will be low, but what the heck?

To be honest, if the cash flow problem you face is that big, dropping price to drum-up business isn’t an insane idea.  The problem may be shortly after the sale is announced, within 30-45 days.

Here’s the problem:

The smell of death — Nothing says I’m desperate more than a quickly launched sale.  The sale you create may send the message your business is in trouble.  What results may be prospective and existing customers looking elsewhere to purchase whatever it is you sell.

You can’t always make it up in volume — Selling a lot today at a discount may mean your cash flow problem gets worse later as you have less money to buy raw materials or pay next months bills.  Low margin sales contribute to cash flow problems, they don’t fix them.

Escalating sales may create a future void — Dragging sales into this month or quarter can have a negative affect on next month and quarter.  When you escalate purchases, the thought you have to consider is how many are buying now as opposed to later? The concern is you make low margin sales this month and no sales next month.  Bad moves to worse.

Upset customers — There’s nothing that irks me more than learning if I deferred my purchase a day or week, I’d have gotten a big discount — especially if I negotiated the higher price with someone who claimed that was a far as they could go.  You can destroy trust with a customer by selling the same solution at two different prices.  What can result is kissing referrals and repeat purchases goodbye.

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None of the above is to say you shouldn’t offer a sale or promotion to spur sales.  The point is to think through the promotion before you run with the idea.  Here are two things to consider before you move forward.

What are your thoughts and experience offering discounts to boost near-term revenue?