GrouponThe success of Groupon is staggering.  40 million subscribers in 150 cities around the world.  From startup in 2008 to the recent offer price of $6 billion by Google.  It’s no wonder that Forbes declared Groupon as the fastest growing company ever.

The PR message they push is that they care deeply about two things:

a) giving people a new reason to rediscover or be introduced to interesting local vendors

b) helping small businesses

In fact, if you caught the ever eccentric, never-a-dull-moment Andrew Mason (Groupon CEO) on Charlie Rose recently, he flat out stated the Groupon was “a savior for small business”.

This is chutzpah and quite likely a sort of unspoken mission statement for the 3,000 Groupon employees, many of whom are cutting deals with local small businesses every day.

But let’s be honest.  You don’t get to $500 million in revenue in two years without a pretty healthy focus on making yourself a truckload of money.

In fact, one of Groupon’s founders Eric Lefkofsky, states on his blog that “for most people who are interested in business or attend business school, the primary motivation is simple – to get rich.”

And even though Groupon is “get rich quick” for it’s founders, they sort of stumbled onto the “quick” part and it’s not a fad.

Groupon is not going away.

So what is a small business to do?

First you’ll have to get in line.  Some cities have a six month waiting list.

Then, once you get over the intoxication of the new car smell, just know that you are dealing with some pretty savvy characters and it’s caveat emptor all the way.

Results for small business have been mixed.  Entrepreneur has an article about that here.

A general rule of thumb seems to be that if you have a service business you are more likely to end up on the net positive side of the ledger than if you have a product-based business.

This is because you split revenue 50/50 with Groupon.  And because Groupon encourages offers that are at least 50% off.  And we all know that margins are bigger in service businesses.

Groupon also runs the transaction so you can guess who gets paid first. So they have no receivables and they get to manage the float which brings them more revenue.

Groupon is smart and backed by smart money.  There is nothing else out there right now that has the potential to turn on a firehose of customers like they can. You just need to negotiate yourself a good deal if you decide to use their service.

PS: Another great local service that is similar but has a philanthropic bent is DealGooder.  We wrote about them recently.