Know your floor
Before setting discount rules, know the minimum margin you need on each kind of work. That number is the line nobody should cross without the owner’s say-so.
Set simple limits
- Up to 5%: the person quoting can decide.
- 5% to 15%: a manager approves.
- Over 15% or below your floor: the owner approves.
Adjust the numbers to your business. The point is that everyone knows them.
Trade, don’t just cut
When a customer pushes on price, offer something in return for a discount: a larger order, a longer contract, faster payment or flexible scheduling. It keeps the value of your work intact.
How discounts erode profit: an example
Say your average job is worth $5,000 with a 25% gross margin, so $1,250 profit. A 10% discount takes $500 off the price but the cost of the job doesn’t change. Profit drops to $750, a 40% fall. To make up the difference you would need to win two-thirds more work at that discount. That is why a modest-looking discount deserves a second look.
Alternatives to discounting
- Add value instead of cutting price: a free follow-up service, an extended warranty or priority scheduling.
- Offer a smaller scope at a lower price.
- Offer better payment terms instead of a lower price.
- Bundle related work at a package price that keeps your margin.
Setting your rules in writing
Write your discount rules on one page and share them with anyone who quotes: the limits, who approves what and what to offer instead. Review them every six months, or when costs change significantly.
When a discount does make sense
Discounts aren’t always bad. They can make sense for a strategic first job with a large client, for filling a quiet period, for prompt payment or for a long-term commitment. The key is that the reason is deliberate and recorded, not a reflex to close the sale.
A simple approval process
- The person quoting applies a discount within their limit, or requests approval for more.
- The request includes the reason, the discount and the resulting margin.
- The approver responds the same day, approving, declining or suggesting an alternative.
- The decision is recorded on the quote.
A same-day response matters. If approval takes a week, staff will find ways around it.
Quick checklist
- Know the minimum margin you need on each kind of work.
- Set discount limits for each role and write them down.
- Require a reason with every discount request.
- Respond to approval requests the same day.
- Offer value or flexible terms before cutting price.
- Record every approval decision on the quote.
- Review discounts given each quarter.
Keep a record
Record who approved each discount and why. It stops the same argument happening twice and shows you, over time, which customers and staff discount most.
On Business and Enterprise plans, NovaSoft One approvals collect quotes that need sign-off in one place and keep the decision with the quote. Staff-only margin details stay off the customer’s copy of a quote.
Common questions
Who should approve discounts?
Small discounts can be left to the person quoting; larger ones should go to a manager or the owner.
Should discounts be shown on the quote?
Showing the original price and the discount makes the value clear to the customer.
How do we stop discounts creeping up?
Set clear limits, require approval above them and review discounts given each quarter.
This guide is general information for Australian businesses, not legal, tax or financial advice. Check anything specific to your situation with a qualified adviser or the relevant government agency.