Original price
How the discount is set
Discount %
Quantity
Second discount %
Stacked discounts apply one after the other, not added together.
Tax rate, if you add it after
Your margin before discount
Used to show what the discount costs you, not just the customer.
Final price
$80.00
You save $20.00, 20% off
final = 100.00 x (1 - 0.20) = 80.00
A discount comes out of margin, not revenue, which is why a small one costs more than it looks.
How do you calculate a discount?
Multiply the price by the discount as a decimal to get the amount off, then subtract it. A 20% discount on $100 is $20 off, leaving $80. Working the other way, if you know the original and the final price, divide the difference by the original: $20 off $100 is 20%.
The calculator above works all three directions, because in practice you are given whichever two numbers someone happened to mention.
Percentage off
The usual case. Price times the rate, subtracted from the price.
Amount off
A flat sum, which is worth more on a cheap item and less on an expensive one.
From the final price
Works out what percentage you actually gave, which is the number to check before you offer it again.
Why stacked discounts are smaller than they sound
Two discounts applied one after the other multiply rather than add. Twenty percent off, then a further ten percent, is 28% off in total, not 30%: the second discount only applies to what is left after the first.
This works in your favour when you are the seller and against you when you are the buyer, and it is the most common arithmetic mistake in a sale. Enter a second discount above and the calculator shows the true combined figure.
What a discount actually costs you
A discount does not come out of revenue, it comes out of profit, because your costs do not move when your price does. On a job priced at a 30% margin, a 20% discount does not leave 10% margin. It leaves 12.5%, and profit falls by more than half.
Before
$100 price, $70 cost, $30 profit, 30% margin.
After 20% off
$80 price, $70 cost, $10 profit, 12.5% margin.
To stand still
You would need to sell three times as much to make the same profit.
That is why the panel above shows the margin the discount leaves and the extra volume needed to break even on it. If the answer is more than you can realistically sell, the discount is a price cut rather than a promotion.
Early payment discounts on invoices: what 2/10 net 30 really costs
The discount that matters most on an invoice is not a sale price, it is a prompt payment discount. Written as 2/10 net 30, it means two percent off if the invoice is paid within ten days, with the full amount due in thirty.
The arithmetic looks trivial and is not. Two percent to be paid twenty days sooner works out at roughly 36.7% a year, because you are giving up 2% of every invoice, twenty days at a time, all year. Use the calculator above with your invoice total and the discount percentage to see the cash cost; the annualised figure is what tells you whether to offer it.
As the supplier
Offering 2/10 net 30 costs about 37% a year. Worth it only if your own borrowing costs more, or the invoice might otherwise go bad.
As the buyer
Taking it earns you the same 37%, risk free, which beats leaving the cash in the account. If you have the money, take the discount.
The formula
discount / (100 - discount) x 365 / (net days - discount days). For 2/10 net 30 that is 2/98 x 365/20.
Common terms and what they cost the supplier each year: 1/10 net 30 about 18%, 2/10 net 30 about 37%, 2/10 net 60 about 15%, 3/10 net 30 about 56%. If those numbers surprise you, aim the discount at slow paying accounts rather than offering it to everyone.
Quick reference: common percent off amounts
What you pay and what you save at the discounts that come up most often.
10% off
$50 becomes $45.00, $100 becomes $90.00, $500 becomes $450.00.
15% off
$50 becomes $42.50, $100 becomes $85.00, $500 becomes $425.00.
25% off
$50 becomes $37.50, $100 becomes $75.00, $500 becomes $375.00.
30% off
$50 becomes $35.00, $100 becomes $70.00, $500 becomes $350.00.
40% off
$50 becomes $30.00, $100 becomes $60.00, $500 becomes $300.00.
50% off
$50 becomes $25.00, $100 becomes $50.00, $500 becomes $250.00.
Coupons, promo codes and clearance markdowns all use the same arithmetic; only the reason changes. Where a coupon stacks on a sale price, the calculator above handles it as a second discount, and sales tax is worked out on the discounted figure rather than the original.
Trade, volume and bulk discounts
Three discounts a business gives that a shopper never sees.
- Trade discount: a standing percentage off list price for the trade, applied before the invoice is written rather than shown on it.
- Volume or bulk discount: a lower unit price above a quantity threshold. Price the tiers so the larger order still earns more in total, not just more in revenue.
- Early payment discount: covered above, and the only one of the three that buys you something concrete, which is cash arriving sooner.
Whichever you use, show it as its own line on the invoice with the original price beside it. A discount the customer cannot see is one they will not value, and one you cannot withdraw.
Discounts on quotes and invoices
How a discount is written down matters as much as its size.
- Show the original price and the discount as separate lines. A single reduced figure hides what the client received and makes the next full-price quote look like an increase.
- Say whether the discount applies before or after tax. In most cases it comes off the net price, so the tax falls too, but the invoice should not leave it to be guessed.
- Give the discount a reason and an end date. A discount with neither becomes the price.
- Apply it to the whole invoice or to specific lines, but be consistent, because a client who cannot follow the arithmetic will query the total.
The quote generator and the invoice generator both carry discount lines that show the original price, the reduction and the total.
Discount questions, answered
How do I calculate 20% off?
Multiply the price by 0.20 to get the amount off, then subtract it, or multiply the price by 0.80 to get the final figure in one step. Twenty percent off $100 is $80.
How do I work out the discount percentage from two prices?
Subtract the final price from the original, divide by the original, and multiply by 100. From $100 down to $80 is $20 off, which is 20 percent.
What is 20% off then 10% off?
28 percent off, not 30. The second discount applies to the reduced price, so $100 becomes $80 and then $72. Stacked discounts always come to less than the sum of their parts.
Does a discount apply before or after tax?
Usually before, so the tax is calculated on the reduced price and falls with it. Some situations reverse that, so state which you are doing on the invoice rather than leaving it to be worked out.
How much does a discount cost my profit?
Far more than the headline suggests, because your costs do not fall with your price. On a 30 percent margin, a 20 percent discount cuts profit by two thirds and leaves a 12.5 percent margin.
How much extra do I need to sell to cover a discount?
Divide your old profit per sale by the new one. At a 30 percent margin, a 20 percent discount means selling three times as much to earn the same, which is rarely realistic.
What is the difference between a discount and a markdown?
A discount is a temporary reduction with a reason attached; a markdown is a permanent change to the price. Repeating a discount often enough turns it into a markdown whether you meant it or not.
Should I discount or add value instead?
Adding something costs you its cost, while discounting costs you its full price in profit. Throwing in an extra service worth $50 that costs you $20 is usually cheaper than taking $50 off the price.
How do I show a discount on an invoice?
As its own line under the item total, with the original figure still visible and the reason beside it. That way the client sees what they were given, and your records show what the work was actually worth.
What does 2/10 net 30 mean?
It is a prompt payment term: settle inside ten days and take two percent off, otherwise the full amount falls due on day thirty. A $5,000 invoice becomes $4,900 for paying twenty days sooner.
What is an early payment discount worth?
About 36.7 percent a year on 2/10 net 30 terms. The formula is the discount divided by 100 minus the discount, times 365 divided by the days saved. As the buyer that is a risk-free return; as the supplier it is an expensive way to get paid sooner.
How do I calculate the sale price after a discount?
Multiply the original price by one minus the discount as a decimal. Thirty percent off $80 is $80 x 0.70, which is $56, and the discount amount is $24.
Is sales tax calculated before or after a discount?
After, in most cases: the tax applies to the discounted price, so a discount saves you the tax on the amount taken off as well. Enter a tax rate above and the calculator shows both figures.
How do coupons and promo codes stack?
One after the other, not added together. A 20 percent sale with an extra 10 percent code is 28 percent off in total. Some retailers apply codes to the original price instead, which is worth checking before you assume.
What is a trade discount?
A standing reduction off list price for trade customers, usually applied before the invoice is written rather than shown as a line on it. A volume discount works the same way but depends on quantity.
Is the discount calculator free?
Yes. No signup and nothing uploaded: every figure is worked out in your browser and gone when you close the tab.