Discount Profit Calculator
A 20% off sale does not cost you 20% of profit. It costs about 42% — because the discount comes out of profit, and revenue barely moves. Here is the real arithmetic before you launch the promotion.
| Line item | Before sale | During sale |
|---|---|---|
| Selling price | — | — |
| Unit cost | — | — |
| Payment / channel fee | — | — |
| Profit per unit | — | — |
| Margin | — | — |
| Monthly profit at your volume | — | — |
| Discount limits | Value |
|---|---|
| Maximum discount before zero profit | — |
| Units per month needed to hold profit | — |
| Extra units to sell every month | — |
The discount comes out of profit, not revenue
This is the whole idea, and it is worth slowing down for. On a $50 product costing $25, profit per unit is $23.25 after fees. Now run 20% off:
| Before | 20% off | Change | |
|---|---|---|---|
| Price | $50.00 | $40.00 | −$10.00 |
| Payment fee | $1.75 | $1.46 | −$0.29 |
| Unit cost | $25.00 | $25.00 | $0 |
| Profit | $23.25 | $13.54 | −$9.71 |
Revenue dropped 20%. Profit dropped 41.8%. The only reason it is not the full $10 is that the percentage-based fee shrinks with the price — you save 29 cents in fees, which is the only thing working in your favour.
General rule: profit falls by the discount amount × (1 − fee rate). At a 2.9% payment fee, a $10 discount costs $9.71 of profit. At zero margin the same discount would cost 100% of profit, which is why the damage scales with how thin your margin already is.
What survives a sale at each margin
As a share of your original profit, this is how much is left after discounting:
| Contribution margin | 10% off | 20% off | 30% off |
|---|---|---|---|
| 60% | 83.8% | 67.6% | 51.4% |
| 50% | 80.6% | 61.2% | 41.7% |
| 40% | 75.7% | 51.4% | 27.2% |
| 30% | 67.6% | 35.3% | 2.9% |
| 25% | 61.2% | 22.3% | −16.5% |
Read the bottom right: at a 25% margin, 30% off means you lose money on every unit sold. Not "make less" — lose. And the revenue line still looks healthy, which is exactly why this goes unnoticed until the month closes.
At a 30% margin, 30% off leaves 2.9% of profit. One return, one ad click, one shipping surcharge, and the promotion is negative.
The volume you need is the number nobody checks
To keep total profit unchanged, units must rise by the inverse of the profit drop. Profit per unit goes from $23.25 to $13.54, so you need 1.72× the units — 71.7% more volume — just to stand still.
Put differently: at 200 units a month, the sale takes monthly profit from $4,650 to $2,708. To recover that $1,942 you must sell 344 units instead of 200, during a promotion period, at a discounted price, without increasing ad spend. Most sales do not come close, which is why heavily discounted stores often report record revenue and falling profit in the same month.
The honest framing: a discount is a purchase of volume using profit as currency. The exchange rate is terrible. Before running one, decide what you are actually buying — cleared inventory, a new customer, or a supplier rebate — and check that it is worth 41.8% of your margin.
Frequently asked questions
Does a discount ever increase total profit?
Only if volume rises by more than the required multiple. Since that multiple is usually 1.5–3×, a discount increases profit only when there is substantial untapped demand — a genuine seasonal peak, a new audience, or a price-sensitive segment that would not buy at full price. Discounting to your existing customers mostly moves purchases forward in time while destroying margin.
How do I allow for returns when running a sale?
Discount periods usually raise return rates, because price-sensitive buyers are less committed. If your return rate goes from 5% to 10%, treat that as a further 5% of revenue lost and subtract it from profit per unit before comparing. The calculator does not model returns directly — see the note under the results.
Is a sitewide 10% off code safer than 20%?
Safer, but not safe. At a 50% margin, 10% off still removes 19.4% of profit and requires 24% more volume to break even on profit. The pattern to notice is that the volume requirement is always larger than the discount — roughly double it at typical margins.
What about "buy one get one" instead of a percentage off?
BOGO on identical items is a 50% discount on a two-unit basket, and it is usually worse than it looks: cost doubles while revenue rises only 50%, so the margin collapse is steeper than a flat 50% price cut. Model it as a 50% discount with double the unit cost, which this calculator supports by entering the two-unit cost.
Last reviewed: October 2026. Assumes a percentage-based payment fee plus a fixed fee, and no change in unit cost during the promotion. Excludes tax, returns, ad spend and shipping subsidies — see the FAQ for how to allow for returns.