Should You Do Black Friday in a Product Business?

Black Friday is not free money. It is a decision to sell the same stock for less and hope the volume covers it.

Here is the maths that tells you whether it will, and what to run instead when it will not.

It is September. Your inbox has already started filling with Q4 planning emails.

Somebody in a Facebook group has announced 40 percent off and a countdown timer.

You have stock sitting there and a quiet October coming. So you start planning a sale you have not costed.

That is how most Black Friday sales get decided.

Should you do Black Friday at all?

Sometimes. Not by default.

A discount is a tool, and it does two jobs well.

It clears stock you have already decided is not worth holding. And it buys new customers, if you can prove those customers come back.

Everything else is you paying for revenue you would have had anyway.

November is the month people were going to buy from you regardless. Discounting it is an expensive way to make a sale you already had.

What does a discount actually cost you?

It comes out of profit. All of it.

Say your landed cost is $20 and you retail at $60. Your gross margin is $40 a unit.

Run 30 percent off. Retail becomes $42. Your margin becomes $22.

The customer saved $18. You did not lose $18 off your price. You lost $18 off your profit, and your profit was only $40.

That is 45 percent of your gross margin gone on every unit you sell.

To make the same money as a normal month, you now need to sell roughly 80 percent more units.

Then take out the ads that made the sale visible, the extra postage, the pick and pack time, and the payment fees on all those extra orders.

Revenue goes up. Profit goes down. That is what a bad sale looks like on a good day.

You cannot run that calculation off a factory quote. You need your true landed cost, and pricing off the wrong number is the mistake that cost me a year.

If you have never worked yours out properly, the execution detail sits over on Source Haus. Start with how to calculate landed cost per unit.

Who actually buys in a sale?

Two groups. The people who were going to buy anyway, and the people who only ever buy on sale.

The first group costs you margin you did not need to give away. They had their card out already.

The second group is the one founders get excited about. New names, big order numbers, a spike that looks like growth.

Then March comes and they are gone.

At Incy Interiors we ran sales for years before I paid proper attention to what happened afterwards. Full price customers came back. Sale customers waited for the next sale.

You do not train customers with your marketing. You train them with your discounts.

The stockist problem

If you sell wholesale, the sale is not only your decision. A stockist with your product on their floor at full price is watching your website, and the relationship you spent months building does not survive being undercut by the brand.

Tell them before you run anything. Better still, give them the same deal, or run yours after theirs.

A sale that costs you a channel is not a sale. It is a trade you never priced.

When is a sale actually worth running?

Three situations. That is the whole list.

• You have decided the stock is dead and you want the cash more than the units.
• You have a real reason a first-time buyer comes back, and you can name it.
• You need cash out of stock before a production deposit falls due.

The first is a clearing decision, not a marketing one, and here is how I work out what to discount and what to write off.

The second only holds if you have built the thing that brings people back. A consumable, a range they collect, or a genuine reason to buy again. Without one, you are buying a single order at a loss.

The third is the honest one, and almost nobody says it out loud. Cash in the bank before a deposit is worth more than margin on paper, and that is how money actually moves in a product business.

Notice what is not on that list. Everybody else is doing it.

What to run instead of 40 percent off

You do not have to choose between a big discount and doing nothing.

The job is a good November that does not permanently cheapen your product.

• Early access for your email list. No discount. First pick.
• A bundle that lifts the order value and protects the unit price.
• Free shipping over an amount set above your average order.
• A gift with purchase, using the slow line you were going to discount anyway.
• A smaller discount on one hero product, full price on everything else.

Early access is the strongest of those and the most ignored. It costs nothing, it rewards the people who already chose you, and it is the reason an email list is worth building before you need it.

Look at the gift with purchase one again. It moves dead stock at full price on the thing that is already selling. A discount moves the same stock at a loss. Same problem, two very different receipts.

How far out do you need to decide?

Now. September, not the week before.

A sale is a stock decision before it is a marketing decision. If the units are not already landed or on the water, there is nothing to discount.

Work backwards from the last shipping date your customers will accept, then back again through your reorder lead time. That is your real deadline, and it usually sits in September or early October.

Ordering extra stock specifically for a sale is the trap. You are committing cash now against demand you have not proven, and sizing an order on hope rather than sell-through is how founders end up discounting again in February.

The other thing that moves is the cost of being seen. Advertising gets more expensive through November because every brand is bidding at once. Budget for that before you set the discount, not after.

And warm the list first. Asking people to buy in the third week of November, after four months of silence, does not work.

Your next step

Work out one number before you decide anything.

Take your best selling product. Write down your landed cost, your postage, your packaging and your payment fees. Subtract all of it from your retail price.

That is your real margin per unit. Now do it again at 20 percent off, 30 percent off and 40 percent off.

Somewhere in that list is a number you are not willing to work for. That is your floor, and it is the only Black Friday decision that matters.

If you cannot hold a margin you would accept at 20 percent off, the problem is not Black Friday. It is your pricing.

Most founders do not decide to discount. They drift into it, because the calendar arrives and everybody else has already started.

A sale you have costed and chosen is a business decision. A sale you copied is a donation.

Working out what your product actually costs you, and what it should sell for, is exactly what we work through inside The Product Path.

Sell it for less on purpose. Never by accident.