Why does a 20% White Friday discount double the number of units I need to cover my costs?
Because the whole discount comes out of your contribution, not out of the price. Taking 20% off a product priced at 50 that costs 30 removes 10 from a contribution of 20, which is half of it, so the units needed to cover the same fixed costs double from 500 to 1,000.
The numbers before and after the discount
Take a store with fixed costs of 10,000 a month, selling a product at 50 with a variable cost of 30. Enter each case into the Break-even calculator using the price after discount:
- No discount: price 50, contribution 20, break-even 500 units, revenue 25,000.
- 20% off: price 40, contribution 10, contribution margin ratio 25%, break-even 1,000 units, revenue 40,000.
- 30% off: price 35, contribution 5, break-even 2,000 units, revenue 70,000.
- 40% off: price 30, exactly equal to the variable cost. The calculator says there is no break-even, because no unit sold contributes anything toward the 10,000.
Why the effect is so much bigger than the percentage
Your product and packaging do not get cheaper because you announced a sale. Every riyal you give the customer is taken from the narrow gap between price and cost. Here that gap is only 20 out of 50, or 40% of the price. So 20% off the price is 50% of the contribution, and 40% off the price is all of it.
A practical rule: before picking a discount, look at the contribution margin ratio the calculator shows. If the discount gets close to it you are selling for almost nothing, and if it goes past it, every sale deepens the loss.
Does this mean cancelling the White Friday offer?
- Not necessarily. The right question is whether the offer will bring double your usual sales. If you normally sell 600 units, 20% off needs 1,000 just to stay at break-even.
- Shorten the offer, or limit it to products with a wider contribution, instead of discounting the whole store.
- Consider an offer that leaves the price alone, such as a small gift with a known cost, and add that cost to the variable cost to see its exact effect.
To work out the price after one discount or several stacked ones, use the Discount calculator, then enter that price here. To see what margin is left as a share of the price, use the Profit margin calculator.
Common questions
Is there a discount field in the calculator?
No. Enter the discounted price directly as the selling price per unit.
The sale lasts one week. Which fixed costs do I use?
Use that week's share of fixed costs, so sales and costs cover the same period.
Why is there no negative number at 40% off?
A negative or infinite figure means nothing here, so the tool explains the reason instead: the contribution is zero, and the fix is a higher price or lower cost, not more sales.