Discounting is used by lots of small businesses and often simply reduces profits...why ?
The simple answer is because the discount isn’t linked to increasing business for you. For example it isn’t linked to a referral or to your customer buying from you again.
Also something that looks like a discount but your customer dosen't value. examples are over inflated retail prices which you heavily discount. It isn't believable because most people know that nobody ever pays the retail price.
If you sell on credit and produce sales invoices there are two additional pitfalls. The discounted price becomes the ‘new’ base price. Secondly prompt payment discounts. Offering 2% off the sales price might seem small to improve your cashflow but this technique can be expensive especially if you are not borrowing to fund your working capital. It can also be ineffective because guess what...your customer pays late and takes the discount anyway. I’ve seen this happen many times.
But there is a better way and its a trick that is used by big business all the time.
Supposing you tell your customer he gets a discount based on quarterly sales volumes and paying on time. You issue this as credit note at the end of the quarter. It's a motivator...your customer will buy from you over the competition because he wants to hit his discount target.
If you have cash sales think about using a loyalty scheme. The fast food and high street coffee retailers use this all the time with their collect token cards but as a small business you can be more imaganitive. Cross sell by offering them a free sample or trial of another of your products which you think they might be interested in. Use your mailing list to email coupons or special offers.