If I run a 25% White Friday sale, how much margin do I have left?
Work out the sale price first, then enter it with the same cost in the calculator. On a product with a 40% margin, 25% off drops the margin to 20% and takes 62.5% of the profit per unit, because the whole discount comes out of profit, not cost. To earn the same amount you need nearly three times your usual sales.
The example in numbers
A product costs 60 and normally sells for 100. After 25% off the sale price is 75, which you can confirm in the Discount calculator. Now run both cases in the Profit margin calculator:
Before the sale (cost 60, price 100): profit 40, margin 40%.
In the sale (cost 60, price 75): profit 15, margin 20%.
The discount is 25, profit was 40, so 15 remains. A quarter of the price took more than half the profit. That is what sellers miss when they see '25%' and assume they are giving up a quarter of their profit.
How many units make up the difference?
To earn the same profit during the sale as in a normal week, divide your usual profit by the sale profit: 40 ÷ 15 ≈ 2.67. If you sell 100 units in an ordinary week for a profit of 4000, you need about 267 units in the sale week to earn the same.
Is that achievable? Perhaps; sale season brings plenty of traffic. But the calculator gives you the number to beat, instead of judging the promotion by order count alone.
Compare a smaller discount
15% off (price 85): profit 25, margin 29.41%.
You need only 60% more sales to make up the gap, because 40 ÷ 25 = 1.6.
The gap between 15% and 25% off looks like ten points on a banner, but it is the difference between needing 1.6 times your sales and 2.67 times. Try several rates before you announce one.
Before you launch the sale
- Work out the sale margin per product, not for the store as a whole. A product with a 25% margin loses money at 25% off.
- Add the season's extra costs to the cost: ads usually cost more during sale periods, and the shipping you absorb does not fall with the price.
- Set a realistic unit target and compare it with what you sold in past seasons, from your own records.
- If the promotion has fixed costs such as ad design or a photo shoot, work out how many units cover them at the sale profit with the Break-even calculator.
Common questions
Is the sale a loss if I do not reach three times my sales?
Not while profit stays positive, but it earns you less than an ordinary week. That may still be worth it if the goal is clearing stock or winning new customers.
Do I work out the discount on the VAT-inclusive price?
Enter the sale price before tax in the margin calculator, so the profit is not inflated.