Discount ROI calculator

How to use it

1. 1Type your figures into the calculator. Nothing you type is uploaded or stored. The answer is worked out in your browser.
2. 2Read the result and its caption. The assumptions are shown on the screen beside the number.
3. 3Open the back office to keep your figures. There you see the same answer beside your other numbers.

What it does

• We multiply your monthly sales by the discount percent. That is the profit you lose IF the same people come and simply pay less. It is the honest worst case, and the number most owners never work out.
• Then we work out how many more customers the discount must bring just to get back to where you started: (price − cost) ÷ (discounted price − cost) − 1. At a 70% margin, 20% off needs 40% more customers to break even. If a discounted sale no longer covers its cost of goods, we say so instead of printing a number.
• We work out what one free visit costs you: the average check times your food cost percent. A $28 meal at 30% food cost costs you $8.40, not $28.
• We multiply that by 10 free visits and show the two costs side by side.
• We assume the discount does not bring in more sales. If you know it does, subtract that gain yourself.
• If your business has no cost of goods (a consultant, a treatment, an empty chair), a free visit costs you nothing. Then there is no ratio to show, and we say so.

Common questions

How do I calculate the cost of a discount?

Multiply your sales by the discount percent. A 20% discount on $40,000 of monthly sales costs $8,000 of profit. Your margin does not change that number.

Why does my margin not change the discount cost?

Profit is sales minus costs. A discount lowers sales and leaves costs the same. So the loss is sales times the discount rate, whatever your margin is.

Does a discount bring in more customers?

Sometimes. But it also cuts the price for every customer who would have paid full price, and that is usually most of them. This tool shows the cost before any extra sales, because that extra is the part owners overestimate.

What does a free visit cost a business?

Only what you hand over. A $28 meal at 30% food cost costs you $8.40. A salon or consultant with no cost of goods gives a free visit for nothing but the time.

Is giving free visits to creators better than a discount?

It costs less for the attention you get. It also reaches people who have not tried you yet, instead of rewarding people who already paid full price. It works when the creator's audience is local. Finding those creators is what the paid KANJIN plan is for.

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