Discount Calculator
What a discount costs the customer, and what it costs you: the share of the profit is always bigger than the share of the price.
Price $120.00
Discount 10% −$12.00
You pay $108.00
Total for 3 $324.00
Saved in total $36.00
Cost $72.00
Margin before 40%
Margin after 33.3%
Profit before $48.00
Profit after $36.00
The discount is 10% of the price and 25% of the profit. That difference
is what a discount actually costs, and it grows as the margin narrows.
Output is valid and updates as you type.
Fix the highlighted fields to update the output.
What a discount costs the customer is obvious. What it costs you is not: ten percent off a price with a 40 percent margin takes a quarter of the profit. That ratio is the reason this calculator asks for your cost, and it is the number the “just give them 10 percent” conversation is actually about.
How to use
- Put in the price before the discount and the percentage off.
- Add your unit cost. This is optional and it is the point of the tool.
- Set a quantity to total up a basket.
Example
A 120 product at 10 percent off, costing you 72:
Price $120.00
Discount 10% −$12.00
You pay $108.00
Cost $72.00
Margin before 40%
Margin after 33.3%
Profit before $48.00
Profit after $36.00
The discount is 10% of the price and 25% of the profit.Ten percent of the price is a quarter of the profit, because the profit was only 40 percent of the price to begin with. The narrower the margin, the worse the ratio: at a 20 percent margin, the same 10 percent discount takes half the profit. At a 10 percent margin it takes all of it.
The rule of thumb: divide the discount by the margin. Ten over forty is a quarter.
Pitfalls
Discounts are compared against margin, not against price. A shop with a 50 percent margin can run a 20 percent sale and keep 60 percent of its profit. A shop with a 25 percent margin cannot.
A discount has to pay for itself in volume. Giving away a quarter of the profit needs a third more sales to stand still. That is a real number to forecast, not a hope.
Stacked discounts multiply, they do not add. Twenty percent off then a further ten percent off is 28 percent off, not 30.
Tax comes after. Apply the discount to the price before tax, then add tax to what is left. Discounting a tax-inclusive price and then backing the tax out gives a different, usually wrong, number.
Free shipping is a discount. Put the shipping cost in your unit cost and the same arithmetic applies.
Compatibility
Arithmetic in the browser: nothing is uploaded and nothing is stored. The share link carries the figures.
The margin figures are gross margin: price less unit cost, over price. They do not include your operating costs, so read them as the ceiling.