How it works
A price cut comes straight out of profit per unit, so you have to sell more units just to stand still. The lower your margin, the more extra volume a discount requires.
In the default example, a $100 product costing $60 earns $40. At 20% off it earns only $20, so you must sell twice as many (100% more) to earn the same gross profit.
Use this before running a promotion to check whether the expected lift in sales is realistic. It looks only at gross profit on the discounted product, not at new customers or add-on sales a promotion might bring.
Formula
Required increase = Margin ÷ (Margin − Discount) − 1, with margin and discount as fractions of the regular price.
Questions people ask
Why does a small discount need such a big sales increase?
The discount comes entirely out of your margin, not your revenue. A 10% discount on a product with a 25% margin removes 40% of the profit per unit, so you need about 67% more sales to make it up.
Is it the same as raising prices in reverse?
No. A price increase lets you lose a surprising number of sales and still earn the same profit. With a 30% margin, a 10% price rise could lose 25% of unit sales before profit falls.
Does this include fixed costs?
No. Fixed costs stay the same whether you discount or not, so matching gross profit means matching net profit too, as long as the extra volume does not require extra staff or space.