How many extra sales do I need to make up for a discount?

You run a sale. Orders rise, the WhatsApp group is buzzing, and it feels like a success. But did you actually earn more? The honest test is whether the extra units you sold made up for the profit you gave away on every unit.

The formula

Units needed after discount, compared with before, equals old profit per unit divided by new profit per unit.

That ratio tells you how many times your original sales you now need to sell to stand still.

A worked example

Take a product priced at Rs 500 that costs you Rs 300 to deliver. Profit is Rs 200 per unit.

Offer 10 percent off. The price falls to Rs 450 and profit per unit becomes Rs 150.

• Old profit per unit: Rs 200
• New profit per unit: Rs 150
• 200 divided by 150 = 1.33

You need to sell 1.33 times as many units to earn the same total profit. That is 33.3 percent more sales, for a discount of only 10 percent.

Check it with numbers

Suppose you normally sell 90 units a month.

• Normal profit: 90 x 200 = Rs 18,000
• At the discount, you need 90 x 1.333 = 120 units to earn 120 x 150 = Rs 18,000

So the sale must lift your sales from 90 to 120 units just to match last month. If it brings you 105 units, your profit is 105 x 150 = Rs 15,750. You sold more, and you earned Rs 2,250 less.

How margin changes the answer

The thinner your profit, the more extra sales you need.

• If profit is Rs 200 and the discount takes Rs 50, you need 33 percent more sales.
• If profit is only Rs 100 and the discount takes Rs 50, the new profit is Rs 50 and you need double the sales.

This is why high-margin products can sometimes handle a promotion, and thin-margin ones usually cannot. If you do not know your profit per unit, start with how to calculate contribution per order.

Do the maths before the offer, not after

Before announcing a sale, write down three numbers.

• Current profit per unit
• Profit per unit at the discount
• Units you must sell to match your normal profit

Then ask a plain question. Is it realistic to sell that many? If your customer list is small and your reach is limited, a 33 percent lift may be difficult. If so, discount less, or offer something that costs you less than money off. A small free gift, for example, may be cheaper.

What the extra sales may also bring

A sale can win new customers who might order again. That has real value, and you can count it using maximum CAC from first order contribution. But count it honestly, using your own repeat numbers, and not an assumption that everyone will return.

A quick rule

For any discount, divide your old profit by your new profit and read the answer as the sales multiple you need. If the multiple looks unrealistic, the discount is too deep. Compare also how a 10 percent discount hits profit for the other side of the same arithmetic.