How many extra sales does a discount need?
A promotion can increase revenue while leaving you with less profit. Before choosing a discount, calculate how many additional orders are needed just to preserve the contribution you were already earning.
Start with contribution per sale
Consider an item sold for 100 with 60 of variable costs. Each sale leaves 40 toward overhead and profit. At a 20% discount, the price becomes 80 but the cost remains 60. Contribution is now 20, so you need twice as many sales to earn the same amount.
| Discount | Sale price | Profit per sale | Units needed |
|---|---|---|---|
| 0% | 100 | 40 | 100 |
| 10% | 90 | 30 | 134 |
| 20% | 80 | 20 | 200 |
| 30% | 70 | 10 | 400 |
| 40% | 60 | 0 | No finite volume |
Whole-unit targets round upward. At a 10% discount, 133 sales earn 3,990 while 134 earn 4,020. The target to match is 4,000.
The calculation
Required new units = original units × original profit per sale ÷ discounted profit per sale. The percentage increase is (original profit ÷ discounted profit − 1) × 100. This only makes sense for a positive original profit and a positive discounted profit.
Three checks before committing
- Can you fulfil the extra orders without increasing costs?
- Will extra advertising or shipping expense reduce the discounted contribution?
- Are you moving genuinely additional stock, or discounting purchases that would have happened anyway?
Where the example can mislead
This table holds cost constant. A revenue-based payment fee may fall with the sale price, but overtime, returns and promotion costs may rise. A clearance sale may have a different objective, such as releasing cash from old inventory. Do not treat equal contribution as a prediction of equal demand or equal cash flow.
For a fuller cost check, use unit economics. If you are deciding whether to attend an event, use the craft-fair calculator to include fixed event costs.