Discount Impact Calculator: What a Price Cut Really Costs
- No invented stats
- Written for UK readers
- Published 19 September 2026
A discount comes straight off your gross profit, not off your revenue, which is why a small price cut needs a surprisingly large jump in volume to pay for itself. This calculator works out your margin after the discount and the extra volume you would need to sell just to end up where you started. It runs entirely in your browser — nothing you type is sent anywhere.
How this works
Gross margin is the share of the selling price you keep after the direct cost of what you sold. So if you know the price and the margin, you know the cost: cost = price × (1 − margin). Your cost does not change when you discount, so the entire discount comes out of the gross profit on each unit.
The calculator takes your price, works backwards to the unit cost, applies the discount to the price, and recalculates the gross profit per unit and the margin at the new price. Note that the new margin percentage is measured against the new, lower price — that is why a ten point price cut does not move the margin by exactly ten points.
The volume figure is the important one. To make the same total gross profit after a discount, you need enough extra units to replace the profit you gave away on each one. The ratio is simply old gross profit per unit ÷ new gross profit per unit, and the uplift is that ratio minus one, expressed as a percentage. In margin-point terms, the required uplift is discount ÷ (margin − discount). Two things fall out of that: the uplift grows fast as the discount approaches your margin, and once the discount reaches your margin, no amount of volume can rescue it, because every extra unit now makes nothing.
A worked example
You sell at £1,000 a unit on a 40% gross margin, so the unit cost is £1,000 × 0.60 = £600 and the gross profit is £400 a unit. You are asked for 10% off.
- New price: £1,000 × 0.90 = £900
- New gross profit per unit: £900 − £600 = £300
- New margin: £300 ÷ £900 = 33.3% (not 30% — the price it is measured against got smaller too)
- Volume needed to stand still: £400 ÷ £300 = 1.33, so 33.3% more units
If you were selling 500 units, that is £200,000 of gross profit before the discount and £150,000 after it — a £50,000 hole. Filling it means selling 667 units instead of 500, at the lower price, with all the extra delivery and support cost that comes with them. Giving away 10% of the price gave away 25% of the gross profit.
Now try 20% off the same product: gross profit per unit drops to £200, and you need 100% more volume — double the sales — to break even on the deal. At 40% off, there is nothing left to recover.
What this doesn't account for
- Fixed costs. This is gross profit only. Extra volume usually brings extra cost to serve, so holding gross profit flat does not mean holding net profit flat.
- Price as a signal. Discounting once teaches the buyer to wait for a discount next time, and it can spread to your existing customers when word gets around.
- Mix. If your margin varies by product or customer, use the margin on the specific thing being discounted rather than a blended average.
- Whether the volume is even available. The calculator tells you what you would need, not whether the market will give it to you.
If you are here because a buyer has asked for money off, the better move is usually to trade rather than concede. How to negotiate without discounting covers what to ask for in return, handling the "it's too expensive" objection deals with the conversation itself, and discounting is a symptom, not a strategy looks at why the request keeps coming up in the first place.
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