How a discount changes your profit per item
By DailyUseKit · Published 5 October 2026
A discount reduces the amount a customer pays, but it does not automatically reduce your costs. Before advertising an offer, check the profit left on each sale. A modest-looking discount can remove a much larger share of your profit.
This guide uses an illustrative selling price of 120 and a total variable cost of 90 per item. You can read the amounts as PHP, KES or another currency, as long as you use the same currency throughout. They are examples, not local market quotations.
Calculate the new price first
Open the discount calculator, choose the percentage-to-sale-price option and enter an original price of 120. For a 10% discount, enter 10. The result is a sale price of 108 and a saving of 12 for the customer.
Next subtract your variable cost: 108 − 90 = 18. Your profit before fixed costs has fallen from 30 to 18. That is a reduction of 12 ÷ 30 × 100 = 40%, even though the customer received only a 10% price discount.
Compare possible offers
| Discount | Sale price | Profit per item | Change from original profit |
|---|---|---|---|
| 0% | 120 | 30 | No change |
| 10% | 108 | 18 | 40% lower |
| 20% | 96 | 6 | 80% lower |
| 25% | 90 | 0 | 100% lower |
At 25% off, this item covers its entered variable cost and contributes nothing toward rent or other fixed expenses. Calling that “break-even” for the whole business would be misleading. A discount above 25% would create a loss on each item under these assumptions.
Find the cost-covering discount limit
The discount that brings the selling price down to the variable cost is (original price − variable cost) ÷ original price × 100. Here it is (120 − 90) ÷ 120 × 100 = 25%. This is a cost-covering boundary, not a recommended discount or a guarantee of overall profit.
Check how many extra sales you need
Suppose you normally sell 20 items at full price. They contribute 20 × 30 = 600 before fixed expenses. At the 10% discounted price, each contributes 18. To reach at least 600, calculate 600 ÷ 18 = 33.333… and round up to 34 whole items. That is 14 more sales than your original 20.
You can check this in the daily profit calculator: enter a price of 108, cost of 90, fixed expenses of 0 and target profit of 600. Setting fixed expenses to zero here deliberately isolates the item contribution. For a real daily target, enter your actual daily fixed expenses instead.
Revisit costs when the offer changes them
Free delivery, new packaging, refunds and payment fees can change the cost of a discounted sale. A fee calculated as a percentage of revenue must be recalculated at the discounted price. Count each expense once and distinguish per-sale costs from fixed daily costs.
A promotion may increase sales, but this calculation does not predict demand. Check whether the extra units are feasible, whether stock is available and whether the offer leaves enough contribution to cover the day. For pricing inputs, see the selling price calculator.