Comment by joeguilmette | Hacker News Reader

Comment by joeguilmette | Hacker News Reader

I ran a small business and ran a ton of Groupons. We are on track for another record breaking year thanks to Groupon. Like anything with small business, you can take the good with the bad and mitigate risk, or you can just crash and burn by making poor choices.

Groupon is amazing, and not very cheap marketing that WORKS, unlike a lot of other not very cheap marketing that does not work. And we sold a LOT of Groupons. Some days 80% of customers are Groupons. When you get 2x your normal business walking through the door it's kind of hard not to make money. Cross sales, up sales, post-experience contact, word of mouth... It's not as easy as just setting up a Groupon and watching money roll in, you have to think about it and work hard to turn it into a positive experience.

But then again, this is business, right? Who said it was going to be a safe, easy bet? Groupon is just another way to market your business.

And it happens to be very consistent and effective.

Please do a write up on your experience, the more details the better. Your results sound great compared to what we've been hearing about recently and I'm certain HN would like to hear your story.

http://news.ycombinator.com/item?id=2654788

here you go :)

So, skydiving.

This is interesting but I'd say you're in the minority compared to most businesses that try Groupon (like restaurants, cafes) and have high fixed costs and slim margins.

Thanks for the write up though.

Restaurants pay about 40% for food. The rest is payroll, rent, etc. In total, they make about 4%, but they lose money hand over fist if the restaurant is empty.

Also, that margin is very rubbery, depending on the dish. They might make a pasta dish for 20% of the cost, and a steak for 70% of the cost.

Also, drinks can have crazy mark-ups.

If the groupon is limited to high-margin meals, then they won't lose money. And they might make a profit on the drinks, or people who change their mind and go for a full price dish.

And they might get some repeat business. Also, it looks good for them to look full - passers-by might assume that the restaurant is packed because it's a good one.

The thing is, owners have to be very careful about the deal they give. Groupon seems a little unpredictable (for non-experts), so it can be very dangerous.

Of course, all marketing has its costs. And restaurants and cafes rarely rely on marketing (fast food excepted).

Yes...

I commented earlier that Groupon is great for those businesses that inherently have unused inventory and businesses like skydiving schools would thus benefit but I'm doubtful many other types of businesses would benefit.

http://news.ycombinator.com/item?id=2654788

Lengthier write up... :)

> When you get 2x your normal business walking through the door it's kind of hard not to make money.

That depends on your margins. A half off coupon that you get half the revenue of means you only get 25% of the revenue for your customers. That can be very hard to make money on, regardless of traffic.

Well, even if you do it at a loss, it's still marketing. Marketing isn't free, and it usually very costly. A stupid billboard costs $5k a month. Our businesses (and most, I'd imagine), run Groupons at a loss and make it up through marketing, cross sales and up sales.

We were getting $60 for a $169 product that cost us $80-100 to make.

So when you say it's hard not to make money with 2x the customers you actually meant you were losing money... I understand that it's marketing, but it's not making money until you get people coming back without a Groupon.

He wasn't making money directly on the Groupon deal, but on upsells: http://news.ycombinator.com/item?id=2654788

Of course you're going to sell a lot of Groupons. But what was the real cost to you based on your margins from whatever you were selling/discounting? Any repeat business from said Groupon customers once the deals are over?

I think this is the main problem for small businesses that have very slim margins and are not seeing return customers after the deal.

It seems that Groupons may be better for SMB's that are service-based (salons, dentists, spas) and have the margin to give.

http://www.quora.com/Groupon/Is-Groupon-good-for-businesses-...

We were getting $60 for a $169 product that cost us $80-100 to make.

You're right, a spa is a MUCH better fit for Groupon than a coffee shop. Higher margins, repeat customers, the ability to schedule customers (weekdays only, etc), etc.

That said, if Groupon is going to kill your business and is a poor fit, why run a Groupon and then complain that it does so? These horror stories you hear about, these businesses would likely be in dire straits anyway because the owners show little business acumen. The attrition rate for B&Ms is ridiculously high and always has been.

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