When it comes to slashing prices, no one does it better than the big guns. Just look at Cotswold Fayre, one of Britain’s biggest speciality food and drink wholesale distributors. In late 2016, it offered a huge 50% discount sale on a huge range of products. Needless to say, buyers scrambled to snap up the deals. They represented fantastic value for money, but they did leave the little fish reeling. The reality is, discounts of this scope simply aren’t viable for SMEs.
Unfortunately, Cotswold Fayre definitely isn’t alone. The likes of Sainsbury’s, Waitrose, Tesco’s, Boots and Asda are also fans of discounts, with recent reports revealing that the latter actively hounds its suppliers for discounts and cash contributions worth millions of pounds. Often, it’s concede or lose business.
The knock-on effect of discounts
Big, established companies may be able to meet these demands. But for small SMEs, discounts can represent a big cashflow problem. When every penny counts, it’s simply not possible to throw around discounts to every supplier in your books. Often, even a small reduction of 10% can mean the difference between taking on a mass order from a new client, or having to turn it down because a previous discount means you simply don’t have the cash to fund production.
The alt-fi solution
This is where alternative finance really steps up. Designed to bridge the gap between sending invoices and receiving payments, selective invoice financing can advance you up to 85% of your account value. This empowers you with the short-term finance you need to grow your business, and offer enticing discounts. GapCap leads the pack, with smart cashflow financing designed to help SMEs compete with the big guns, without bleeding themselves dry. Plus, it’s flexible and selective which means you can pick and choose what invoices you want to finance. And no, there isn’t a lock-in contract or crippling overdraft fee in sight.
Ultimately, discounts will impact on your bottom line. But at the end of the day, you need to offer incentives if you’re going to compete with bigger suppliers. So, what can you do? The good news is, with the right approach discounts don’t have to cripple your business. The first step is pricing your products accordingly to compensate for inevitable discounts. Then back yourself up with select financing that unlocks the cash you’re owed, and keeps you afloat when you’re forced to offer discounts.