Discount and Offer Profit Calculator: how much more you need to sell
How many more sales a discount, BOGO or free gift needs to earn the same gross profit.
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About the Discount & Offer Profit Calculator
Before you run a festival sale, see what the offer does to your profit. Enter your selling price, what one unit costs you and the offer: a percentage off, a flat amount off, buy one get one free, or a free gift. You get the profit on each sale, the extra sales you need to earn the same gross profit, the discount at which you stop making money, and a ladder of common discounts. GST is taken out of prices that include it. It runs in your browser.
How it works
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Step 1
Enter the usual price (tick the box if it includes GST), the cost of one unit, and any costs you pay on every sale, such as delivery.
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Step 2
Choose the offer and its size, and if you like, how many you usually sell in the offer period and how many more you expect.
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Step 3
Read how many more sales the offer needs, compare discounts in the ladder, and copy the summary for your team.
Why discounts need so many extra sales
A discount comes out of your margin, not just your price. If a ₹1,000 product costs you ₹600, a 20% discount cuts your gross profit per sale from ₹400 to ₹200, so you need twice as many sales, 100% more, to earn the same. The thinner your margin, the faster the extra sales needed grow.
GST and offers
Under section 15(3)(a) of the CGST Act, a discount shown on the invoice at the time of sale is not part of the taxable value, so GST is charged on the discounted price, as the calculator does. CBIC Circular 92/11/2019-GST treats buy one get one free as two items sold for one price, not a free supply. Input tax credit cannot be claimed on free gifts, so enter a gift's cost including GST.
What this tool cannot do
It works out gross profit only: rent, salaries and advertising are not included. How many more customers an offer brings is your own estimate. It does not count customers who come back later, or sales you would have made anyway at full price. It is not tax advice: check the GST treatment of your offer with your accountant.
Frequently asked questions
How do I work out how many more sales a discount needs?
Divide your gross profit per sale at full price by the gross profit per sale with the discount. A ₹600 product that costs ₹360 earns ₹240; at 15% off it sells for ₹510 and earns ₹150. 240 ÷ 150 = 1.6, so you need 60% more sales to earn the same gross profit. The calculator does this for any offer.
Is buy one get one free the same as 50% off?
Per unit, both give away half the price, so if your gross margin is under 50%, both lose money on every unit. The difference is volume: buy one get one free makes each customer take two units, so you earn or lose twice as much per customer and use twice the stock. Enter both offers here to compare them.
Should I enter prices with or without GST?
Enter the price the customer pays and tick "The price includes GST" if it does, with your GST rate. The calculator takes GST out first, because GST is not your income: you pass it on to the government. Enter your cost without GST if you claim input tax credit on it, and with GST if you do not.
What is a break-even discount?
It is the discount at which a sale only just covers the cost of the product and the other costs you pay on every sale. At a deeper discount every sale loses money, however many you make. It equals your gross margin after those costs: a product with a 35% margin breaks even at about 35% off.
Is a free gift cheaper than a discount?
Often, because a gift costs you what you paid for it, not its printed price. A gift printed at ₹200 that cost you ₹80 takes ₹80 from your profit per sale, while ₹200 off the price takes ₹200, less the GST in it. Use the gift's cost including GST, since you cannot claim input tax credit on free gifts.
Related reading
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