Check out the effects of discounting on gross margins in the tables below. You may find you are not so quick to offer a discount to win the work.
The first table demonstrates that on a margin of 30% you can lose 25% of revenues and still produce the same profit if you raise prices by 10%. In other words, take Friday off!
Conversely, the second chart demonstrates that should you discount by 10% you need to generate an extra 50% revenue to compensate, no mean feat. Or in layman’s terms work Saturday, Sunday and half of Monday for the same return. Makes you think doesn’t it.
Table to calculate percentage sales volume increase as a result of price reductions at various gross margin per cent levels to maintain same gross margin.