Discount Break-Even

Discount break-even is how many sales at a discount it takes to make the same profit as one sale at full price. A discount comes off the price, but the item costs the same to make, so the discount comes out of the profit on each item, and that profit is a much smaller number than the price.

To work it out, take the discount off the full price, subtract what each item costs you (materials, packaging and your own time), and divide the full-price profit by the profit that is left. For example, a $40 wallet that costs $24 to make and pack leaves $16 before selling fees. 20% off $40 is $8, so it sells for $32. $32 minus $24 leaves $8 of profit, and $16 ÷ $8 = 2 sales to match 1. 30% off is $12, so it sells for $28. $28 minus $24 leaves $4, and $16 ÷ $4 = 4.

Multiply the discount break-even by what you would normally sell in the days the sale runs. If you normally sell 10 wallets in that time, 20% off needs 20. If you can’t realistically sell that many, shrink the discount or skip it. If the discount uses up your whole profit, no number of sales matches the full-price profit. If the discount is any bigger, each sale pays you less than your costs, counting your time.

Margin is profit as a share of the full price: for the $40 wallet, $16 ÷ $40 = 40%. The extra sales needed, as a percentage, are the discount divided by what is left of the margin after the discount. At 20% off a 40% margin, 40 minus 20 leaves 20, and 20 divided by 20 is 1, or 100% more, the same as 2 sales for every 1. A higher-margin item needs fewer extra sales at the same percent off. Selling fees push the real number higher, because they come out of the profit too, so use what you keep after fees at each price. A discount can still be worth running when the payoff sits outside the single sale, such as clearing dead stock or winning a customer who comes back.