Discount profit margin calculator
Enter the price and cost of a product and the discount you plan to run. The calculator returns the margin after the discount, the profit per unit, the extra volume you need to earn the same profit and the deepest discount that keeps your minimum margin.
What a discount does to your profit
A discount lowers the price and leaves the cost where it was, so the whole cut comes out of your margin. Take a 40 dollar product that costs 16 dollars to buy or make. At full price you keep 24 dollars a unit, a 60 percent margin. Run 20 percent off and the price becomes 32 dollars, you keep 16 dollars a unit, and the margin is 50 percent. A fifth of the price disappeared, but a third of the profit did.
That gap is why discounts feel fine on the storefront and hurt in the ledger. The lower your starting margin, the worse it gets: at a 30 percent margin, a 15 percent discount already halves what you earn on each sale.
How many more units a discount has to sell
To earn the same gross profit as before, you have to sell more units. The calculator uses the formula derived in the break-even discount guide: required volume increase equals the discount divided by your margin minus the discount. In the 40 dollar example that is 20 ÷ (60 − 20), or 50 percent. You earned 2,400 dollars selling 100 units at 24 dollars. At 16 dollars a unit you need 150 units to get the same 2,400 dollars.
When the discount equals or exceeds the margin, the answer is that no volume is enough. Each sale earns nothing or loses money, so selling more only deepens the loss. The calculator says so in words instead of printing an impossible number.
The deepest discount that is safe
The second answer works backwards from a margin you refuse to go under. Enter that minimum and the calculator finds the lowest price that still delivers it, then shows how far below today's price that is. With a 16 dollar cost and a 30 percent minimum, the floor price is about 22.86 dollars, so the deepest discount on a 40 dollar product is about 42.9 percent. A stacked sale that reaches past that line sells below your own rule.
Use it before a sale, not after: pick the products, run each one through the calculator, and exclude or lower the discount on any product whose answer is smaller than the offer. Then ask whether you believe in the extra volume the first result asks for, using your own history from a similar promotion rather than anyone else's numbers.
How the math works
Required volume increase = D ÷ (M − D), where M is your gross margin on the current price and D is the discount, both as a share of that price. Deepest discount = 1 − [cost ÷ (1 − minimum margin)] ÷ price.
- The margin is product cost against price. Payment fees, packaging and shipping you absorb are not included; add them to the unit cost first if they are material.
- The old volume is assumed to sell anyway at the old price, so only the extra units count as new. Shoppers who would have paid full price are the hidden cost the formula does not price.
- One product at one discount. A stack of codes and sales has to be multiplied out first; the discount floors guide shows how.
The derivation, with worked examples, is in Break-Even Discount: Extra Volume You Need. Every figure the calculator shows comes from the numbers you type; nothing is a benchmark.
Questions about this calculator
How do I calculate profit margin after a discount?
Subtract the cost from the discounted price and divide by the discounted price. A 40 dollar product that costs 16 dollars has a 60 percent margin. At 20 percent off the price is 32 dollars and the margin is (32 − 16) ÷ 32, or 50 percent.
How much more do I have to sell to make up for a discount?
Divide the discount by your margin minus the discount, both as shares of the original price. With a 60 percent margin and 20 percent off that is 20 ÷ 40, so you need 50 percent more units to earn the same gross profit.
What if the discount is bigger than my margin?
No amount of extra volume recovers it. If the discount equals the margin each sale earns nothing, and above it each sale loses money. Shrink the discount, exclude the product, or use an offer whose cost does not scale with the price, such as a gift.
Does this include shipping, payment fees and returns?
No. The calculator uses the unit cost you enter. Add the packaging, pick and pack, shipping you absorb and fees to that cost if you want them counted. Returns and shoppers who would have paid full price make a real discount cost more than the result shows.
Does Shopify show the margin after discounts?
Shopify's profit reports show margin for products that had a cost recorded when they sold, and the sales figures they use are net of discounts. That makes the report a good check after a promotion; this calculator is for deciding before one.
Related reading
Sources
- Shopify Help Center: Profit reports (accessed October 10, 2026)
- Shopify Help Center: Discount combinations (accessed October 10, 2026)