Discount calculator for shops

A 10% discount does not cost you 10% of your profit. It costs 10% of the price, and your cost does not change. All of the discount comes out of the profit.

Take an item that costs you $12 and sells for $20. You make $8, a 40% margin. Put it on at 10% off. The price falls to $18, and you still pay $12 for it, so profit falls to $6. A $2 discount cut your profit by a quarter.

• Sale price = price × (1 - discount)
• New profit per item = sale price - cost
• New margin = new profit ÷ sale price
• Units needed to keep the same profit = old units × (old profit per item ÷ new profit per item)

The last line is the one that matters. Total profit is profit per item times units sold. If profit per item falls, units must rise by the same factor to leave the total unchanged.

Here is the $20 item with a $12 cost at different discounts.

A 10% discount needs a third more sales. A 20% discount needs double. At 30%, you have to sell four times as many just to earn what you earned before, and at 40% you are selling at cost, so no number of extra sales will help.

In numbers: if you sell 50 of this item a week at full price, you earn $400 a week from it. At 10% off you need to sell 67 a week to earn about the same. At 20% off, you need 100. Enter your weekly or monthly sales in the optional box and the calculator does this for you.

None of this means never discount. The question is what you get for the profit you give up.

• Clearing slow or dead stock. Cash from stock that will not sell is worth more than the profit you would never collect. A discount that gets you your cost back is better than a full price sitting on the shelf. See slow-moving and dead stock.
• Items near the end of their useful season, such as school supplies in October.
• A loss leader, where one low-margin item brings people in who also buy higher-margin items. Be honest about whether they do.
• Bundles, where a small saving moves several items at once.

A poor reason to discount is a quiet day. A discount on your best sellers gives away margin to customers who would have paid full price.

• Discount high-margin items first, where there is more room.
• Offer a smaller discount for a set time rather than a big one with no end date.
• Give a free item or a bundle instead of a lower price on a single item. The free item costs you its cost, not its price.
• Set a minimum spend, so the discount applies to a larger basket.
• Check the numbers before you print the sign, using this page, and record the result afterwards.

Start from a margin you understand. The markup and margin calculator shows your margin at any price, and how to price products covers setting prices that leave room for a sale.

• Costs. This uses cost per item and ignores fixed costs. If a promotion needs extra staff or advertising, add that to the cost of the discount.
• Extra customers. It tells you what you need to sell, not what you will sell. Watch your actual results.
• Sales tax. Use prices before GCT or VAT. The GCT calculator can strip it out.
• Price memory. A frequent discount teaches customers to wait for it.

Shopkeepa's sales history lets you look back at what sold during a promotion. See sales and profit reports.