Friend and family discounts: do they hurt or help?

Let’s take a peek at a common scenario. You’ve been working like crazy to get everything ready to open your brand new business. You’ve got flooring, you’ve got equipment, you’ve got a sign on the building and business cards. You’ve even got software to manage the back end. The only thing missing are clients. So you reach out to all your friends and family in the area and offer them the deal of the century to train with you.

The thought bubble over your head reads something like this: “I need bodies. I’ll discount my friends and relatives and they’ll refer additional clients to me. Voilà!”

Now at the risk of bursting said bubble, the logic above isn’t always sound.

It’s been almost 10 years since I was in this position, bootstrapping a small service business start up. I wasn’t about to charge my family members because certainly they would refer their friends and coworkers and it would boost our business.

Alas, it didn’t happen that way for us. Family members came and enjoyed their incredible discounts or free memberships but rarely if ever referred anyone. Now, to be fair this was well before the average Joe who wanted to get in shape had a framework for understanding strength and conditioning or CrossFit. So perhaps they were trying to refer folks but were unsuccessful because of the general lack of awareness of our style of training. All I know for sure is that the stream of referrals I expected did not materialize. And the extra $200-300 worth of discounted family memberships would have dramatically improved our financial position at the time.

Let me think out loud here—and feel free to correct me if you think I’m off base—but shouldn’t friends and family WANT to help you get your business off the ground? How’s this for a radical concept? Charge them full price, and then give them an incentive to help you grow: Give them $10 off per month for each new client they convince to sign up. Clearly, this will only work if your service is something they really want to take part in. They likely will have no interest in paying full price (or referring folks, for that matter) if you’re begging them to use your services in the first place. If that’s the case, c'est la vie!

Of course, there are people in our lives—friends and family members—who may not be able to fully afford our services. I’m certainly not opposed to offering discounts where appropriate. But I find the friends and family “bro deals” to be a slippery slope that can put a fledgling business in a tight financial position. Once you establish yourself and have consistent and predictable revenue, you have greater flexibility to extend discounts and scholarships to those who really need it.

Okay, let me hear it. Do you think your friends and family EXPECT a deal? Or would they pay full price with an incentive plan similar to the one I’ve described above?