Living in Colorado is great! We get to play outdoors in both winter and summer. Being outdoors is part of the Colorado lifestyle – but it can be a little hard to operate a business when your customers are on vacation. Businesses may try to cut their prices to get clients to come back, but doing this can lead to inferior products and services for the client. If you are a client of ours, please read on and get an understanding of how group coupons work against the business and eventually against the consumer. If you are a graduate, what do you do as a business owner to keep the revenue coming in? Offer deals, right? Loyalty programs or direct mailers with discounts are all good things to get your client interested in your services when they have lots of things pulling on their time. Many businesses fall into the Groupon trap, only to mortgage their very future. Follow me for a moment while I do the mathematics of these massive price discount schemes.
It’s all in the numbers
We all like to get a discount, right? We see these sales on TV where a store advertises 50% off…and we fall for it! We think that a business wouldn’t dare cheapen up their product or service just to make a sale, right? As a business owner you may think that giving a 50% discount means you have to do twice the amount of treatments to make the same amount of money…wrong! To calculate the actual cost of giving discounts, start with your overhead. Add up your rent, insurance, laser payment and all the other overhead expenses (QuickBooks is great for this). Divide that total by 20, which is the average number of working days in a month. Then divide that number by your average number of treatments you do in a day. What you get is a total that equals the amount of overhead dollars that must be covered by each client treatment.
Say you have $10,000 per month in overhead, divided by 20 equals $500 per day, divided by 10 clients per day equals $50 in overhead expenses that needs to be covered by each client. So if you were charging $150 per treatment and now give out a Groupon and only charge $75 per treatment, you will have to do FOUR times the number of treatments to make the same amount of money! Do the math. At $150 per treatment with overhead of $50 per treatment you ‘make’ $100, but at only $75 per treatment with the same overhead of $50 per treatment you now only ‘make’ $25!
Let’s talk Groupon
Bad thing is you now have to lower your overhead to make money. Lots of ways to do that. You can wash your towels every other day instead of every single client. You can use more saline in your Botox to water it down so it goes farther on each client. You can defer laser maintenance until it totally stops running. You will have to do something because you now are seeing four times the number of clients in a day. But Groupon doesn’t work for free and Groupon takes 1/2 of your SALES PRICE. Now how many treatments will you have to do, or worse, what kind of cuts do you have to make, when you are only getting $37.50 of that $75 Groupon to cover your $50 overhead?