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Does Your Business Belong on a 'Daily Deal' Website like Groupon?

By Cynthia Hsu, Esq. on November 01, 2011 6:42 AM

Many small businesses put themselves on daily deals websites like Groupon and LivingSocial. But other business remain wary.

Some business owners complaint that they draw in customers that are frugal and only willing to spend a certain amount.

And the daily deals sites take a cut of the purchase. In the end, a business can sink a lot of money into a deal that may not result in long-term business growth. But for some, putting out a social deal can be a powerful marketing and publicity tool.

So does your business belong on a daily deals site?

Unfortunately, there's no simple answer.

Whether or not your business will benefit from a daily deals site is ultimately something you will have to calculate. Think about it this way: how many expenses will you incur by slashing your prices 50%? And how many new customers will you need to hook in order to recoup your losses?

As a business owner, you might also need to negotiate the share of revenues with daily deals sites, according to Business Insider. Traditionally, these companies used to take in 50% of the cost of your coupons. This leaves businesses with only a few dollars to cover the expenses of their own products.

Negotiating the 50% take down to a more business-friendly 5 or 15% might save your company thousands of dollars.

It might also be worthwhile to note that daily deals sites seem to be bad for certain industries. Businesses on daily deals sites that are small but operate in very competitive industries with a low profit margin seem to be the biggest losers. Those that tended to do well were health services and special events industries.

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