Discount break-even calculator
A discount feels like growth because volume goes up. This shows how much it has to go up just to stand still, before you approve the next sitewide sale.
How it is calculated
Margin after discount = Gross margin − discount Volume multiplier = Gross margin ÷ (Gross margin − discount) Extra volume needed = Volume multiplier − 1
Gross margin and discount are both percentages of the full selling price. If the discount is equal to or bigger than the margin, every discounted unit loses money and no amount of extra volume can make up for it.
How to use the result
Compare the required uplift with what past promotions actually delivered, measured against a comparable period, and remember that some of the extra volume is pulled forward from full-price sales you would have made anyway.
Questions
How much more do I need to sell to cover a discount?
Divide your gross margin by your gross margin minus the discount. With a 60% margin and a 20% discount, you need 60 ÷ 40 = 1.5 times the volume, or 50% more units, just to earn the same gross profit.
Why are discounts so expensive for low-margin products?
Because the discount comes straight out of margin. On a 30% margin product, a 20% discount leaves 10% margin, so you need three times the volume to earn the same profit.
Does this include advertising cost?
No. It compares gross profit before marketing. If the promotion also needs extra ad spend, the real uplift required is higher.
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