Design a smart discount policy


Who this is for

Founder led lower-middle market companies with 5 to 50 million in annual revenue that want discipline without friction.

The quick answer

Use discounts that reward behaviours that lower cost or raise lifetime value. Prepayment, multi year terms, and volume steps tied to a real cost curve help. Avoid one off or evergreen discounts with no value traded back. Set approval guardrails and review deals each week so patterns do not drift.

The method in six steps

  1. Define goals
    Name the behaviours you want such as faster cash, longer terms, larger commitments, or entry into a strategic site.

  2. List allowed types with fences
    Early pay credits, term credits, bundle credits, and volume steps that match a true cost break. Forbid end of quarter panic cuts and competitor matching without proof.

  3. Set approval bands
    Reps can grant small credits within a tight band. Managers approve the next band. Executives approve anything beyond. Keep rules simple so approvals are same day.

  4. Use a give and get rule
    No discount without value back such as term, prepay, volume, scope, or a reference. Teach reps to ask for the trade first.

  5. Instrument the pipeline
    Capture discount type and percent on each deal. Review by segment and by rep each week. Coach or change rules when patterns hurt margin.

  6. Publish a one page policy with examples
    Write rules in plain words. Add five worked examples. Role play quarterly.

Example

A software firm replaced ad hoc cuts with a give and get policy. Average discount fell from sixteen percent to nine percent and collections improved due to annual prepay credits.

Pitfalls and fixes

  • Legacy special deals that never expire. Set expiry dates and remove them.

  • Blanket competitor matching. Require proof and a trade back.

  • Slow approvals. Keep bands simple and promise same day decisions.

Checklist

  • Goals tied to cash and lifetime value

  • Allowed discount types and fences

  • Approval bands with owners

  • Give and get rule in use

  • Pipeline tracking by type and percent

  • One page policy and examples published

Related links

  • Raise prices without churn

  • Build a tiered pricing model

  • Set your pricing review rhythm

Want discounts that help deals without killing margin. Contact Founded Partners and we will build the rules and the review rhythm with you.