Discounting is reducing price to win or retain a deal. It has an outsized effect on profitability because the discount comes entirely out of margin, not cost. Habitual discounting also trains buyers to expect it and signals that the original price was never firm.

A discount comes straight out of your margin, which means a 10% discount can wipe out a much larger share of your profit than founders expect. Worse, discounting to close teaches buyers that your price is negotiable, so every future deal starts lower. Holding price is uncomfortable in the moment and it protects both the margin and the positioning.

Example:

On a 40% margin, a 10% discount surrenders a quarter of the profit on that deal. The revenue barely moves; the margin takes the hit.

Why is discounting so costly?

The discount comes entirely from margin, not delivery cost, so a modest discount can erase a large share of the profit on a deal.

What is the hidden cost of discounting?

It trains buyers to expect lower prices and signals that your original price was not firm, weakening every future negotiation.