Why discounts can reduce profit faster than revenue
A discount usually reduces selling price while most of your costs stay unchanged. That means the discount is taken disproportionately from the profit portion of each sale.
Formula
Discounted price = normal price × (1 − discount %). New profit = discounted price − cost.
Example
If a £60 sale costs you £35, profit is £25. A 15% discount cuts the price to £51 and profit to £16 — a 36% reduction in profit per sale.
Common mistakes to avoid
- Judging a promotion only by the percentage discount.
- Ignoring the extra sales required to replace lost profit.
- Discounting below variable cost just to increase revenue.
ProfitMaths provides general calculation tools and educational information. Results are estimates and are not accounting, tax, legal or financial advice.