Business
Discount Profitability Calculator
See profit after a sale price cut, and how many extra units you need to match the old profit.
Does the discount earn its keep?
A percentage off the ticket price looks generous to shoppers and dangerous to margin. If a product runs on 30% gross margin, a 20% discount leaves only a thin slice — and a 25% discount can push the line into loss before you count ads or returns. This calculator shows how much extra volume you need after a discount to earn the same profit as selling at full price. If you need more than double the units to stand still, the promotion is probably a traffic or clearance play, not a profit play. Use your true margin after product cost and selling fees, not a hoped-for markup. Cross-check with product profit and gross margin. Estimates for planning only — not accounting advice. Clearance discounts can still be rational when they free shelf space or avoid write-offs — just separate that goal from everyday promotional maths. Sitewide codes that stack on already-sale items deserve a second pass with the true net price.
Worked example
An item costs £40 and sells for £80 (50% margin, £40 profit). A 20% discount drops price to £64 and profit to £24. To match the original £40 profit you need 40 ÷ 24 ≈ 1.67× the volume — roughly 67% more units. If you only expect a 20% uplift in sales, the promotion reduces total profit. If ads still take £5 per order after the discount, contribution can disappear even when the volume multiplier looks achievable on paper.
Limits and assumptions
Fixed overheads are ignored; this is contribution maths. Bundles, gift-with-purchase and coupon stacking need separate modelling. Brand and inventory goals can justify a money-losing discount — just call it that.
Frequently asked questions
How much volume do I need after a discount?
Divide original unit profit by discounted unit profit. That multiplier is the volume you need to match profit.
Can a discount ever improve profit?
Yes if the uplift in units exceeds the break-even multiplier, or if you clear stock that would otherwise be written off.
Should marketplace fees sit in the margin?
Yes. Use margin after referral and fulfilment fees so the discount test matches cash you keep.
What about multi-buy deals?
Convert the deal to an effective percentage off per unit, then run the same volume test.
How do stacked site-wide codes change this?
Apply discounts in till order first with discount stacking, then test profitability on the final net price.