Discount ROI Calculator
What does that discount really cost you?
What a discount really costs you, next to giving a few free visits to local creators.
This discount ROI calculator shows what a price cut really costs you. A 20% discount does not cost 20% of your profit. It costs 20% of your sales, because your food cost stays the same when you charge less. We put that number next to the cost of giving a few free visits to local creators.
Profit lost = monthly sales × discount %, if no extra customers come. Extra customers needed just to break even = (price − cost) ÷ (discounted price − cost) − 1. Cost of one free visit = average check × cost of goods %.
What is left after food and drink cost, as a % of sales
The offer you are thinking of running
What one free visit is worth to a guest
A 20% discount costs
$8,000
every month
10 free visits cost
$84
$8.40 each
To break even on that discount you need 40% more customers than you have today. Not more sales: more customers, every month the discount runs.
For what that discount costs you each month, you could give 952 free visits, one each to a creator who posts about you.
A percent discount comes straight out of profit. Your food cost does not fall when you cut the price. So a 20% discount costs 20% of sales, not of margin. A free visit costs only what you hand over: $8.40 of ingredients, not the $28 menu price. We assume the discount does not bring in more sales.
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How this screen worksHow this works
- 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.
Free back office
Stop slashing your margins.
Discounts cost you more than you think. Protect your revenue by running a digital loyalty card instead. No app to download, just customers who come back.
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