Although discounting — through coupon sites like Groupon and BuyWithMe or even on your own — can help you attract new customers, selling anything at a loss won’t help you generate a positive cash flow.
Discounting may or may not work for your business. But if you do, know the costs and impact of what you’re offering and be prepared for the fallout. Among other things, you’ll need to know your overall cost basis — that is, what you paid for something. You should also know your how much you should ideally charge, the cost of your offer and the profit margins on your product or service. How else will you know if your discount has you breaking even or operating at a loss? To do the math, use a break even calculator.
Now, if you can upsell to clients, create branding, or bring in new customers; Groupon or discount sites may be great choice. Let’s assume that you can bring in 300 or 1000 new customers by discounting. The question is timing. On a site like groupon.com you may be able to achieve that in 3 days. How long would it take you to achieve the same results without discounting. Discounting is really a back end cost for advertising as oppose to front end cost when dealing with coupon sites. In reality, this can be a method of funding to existing businesses, with a back end cost.