How much discount can I afford?
A discount comes straight out of your margin, after fees. Work out the floor before the sale, not after the orders come in.
The floor price
The lowest price you can sell at without losing money covers your cost, shipping you pay, fixed fees per order and the percentage fees taken from the sale price.
floor price = (cost + shipping + fixed fee per order) ÷ (1 − percentage fees − tax %)
maximum discount = 1 − floor price ÷ regular price
Example with made-up numbers
Regular price 40 · cost 12 · shipping you pay 4 · fixed fee 0.30 · percentage fees 10% · tax 0%
Floor: (12 + 4 + 0.30) ÷ 0.90 = 18.11
Maximum discount: 1 − 18.11 ÷ 40 = 55% (at that point you earn nothing)
The maximum discount is a break-even point, not a target. Decide the minimum profit per order you want to keep and add it to the top of the floor formula.
price with a minimum profit = (cost + shipping + fixed fee + minimum profit) ÷ (1 − percentage fees − tax %)
With a minimum profit of 8: (12 + 4 + 0.30 + 8) ÷ 0.90 = 27.00 → discount of 32.5%
How many more sales a discount needs
Every discount cuts profit per order, so you need more orders to earn the same total:
profit per order = price × (1 − fees % − tax %) − cost − shipping − fixed fee
sales needed = regular profit per order ÷ discounted profit per order
Regular at 40: 40 × 0.9 − 16.30 = 19.70 · at 25% off (30): 30 × 0.9 − 16.30 = 10.70
19.70 ÷ 10.70 = 1.84 → you need 84% more orders to earn the same
That is the number to keep in mind: a 25% discount that brings 30% more orders makes you less money than no sale at all.
Alternatives that protect margin
- Bundles: discount a set rather than each item; shipping and fixed fees are paid once.
- Free shipping over a threshold to lift order value.
- A gift with purchase that costs you little.
- Discount slow stock only, and keep bestsellers at full price.
Check channel fees
Each marketplace and payment provider charges differently, and some charge more for promoted listings during sales. Check your channel's current fees before you set prices; the method is in the pricing calculator for Etsy, Amazon and Shopify guide. For stock levels before a sale, see the inventory spreadsheet, and for a market stall, the craft fair break-even calculator.
Plan the sale in a sheet
One row per product with cost, shipping, fees, regular price, floor price and your chosen sale price. Add a column for profit per order at the sale price and one for the extra orders needed to match regular profit. Sort by that last column: the products that need the fewest extra orders are the ones worth discounting.
Frequently asked questions
How do I calculate the maximum discount I can offer?
Work out your floor price, (cost + shipping + fixed fee) divided by (1 minus percentage fees and tax), then maximum discount = 1 minus floor price divided by regular price.
How many more sales do I need to make up for a discount?
Divide your regular profit per order by your discounted profit per order. A result of 1.84 means you need 84% more orders to earn the same.
Are bundles better than discounts?
Often, because shipping and fixed fees are paid once per order, so you can offer a better deal while keeping more margin.
General information, not financial, tax or legal advice. Examples use made-up numbers.
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