In the example below, a 10% price discount requires 33.33% more sales to preserve contribution. It does not require only 10% more sales. The result depends on the original contribution per sale and assumes variable cost per unit stays unchanged.
Start with the original sale
Price is 100 and variable cost is 60, so contribution is 40. Selling 100 units creates 4,000 of contribution before fixed costs.
After a 10% discount, price is 90. Cost is still 60, so contribution falls to 30.
New units required = 4,000 ÷ 30 = 133.33
You must sell 134 whole units to meet or exceed the old total in this example. At 133 units, contribution is only 3,990; at 134 it is 4,020.
The general relationship
Let P be original price, V variable cost and d the price discount as a decimal:
Extra volume fraction = (P − V) ÷ (P × (1 − d) − V) − 1
This only works when discounted contribution remains positive. At a zero denominator, no finite extra volume restores the target contribution. With a negative denominator, each additional sale makes the contribution shortfall worse.
| Discount on 100 price | Contribution after 60 cost | Extra volume required |
|---|---|---|
| 5% | 35 | 14.29% |
| 10% | 30 | 33.33% |
| 20% | 20 | 100% |
These percentages are not estimates of how customers will respond. They show the volume needed if the other assumptions hold.
Check what more sales would cost
If more work needs overtime, delivery runs or another employee, cost is no longer unchanged. Model that extra cost before using the table. Also ask whether you have enough delivery capacity.
Percentage-based payment fees move with price; fixed transaction fees do not. Refunds, returns and discounts on only part of a bundle also change the model. Define what is being discounted before entering values.
Compare alternatives
Reducing scope, offering a different delivery date or removing an expensive feature changes the economics differently from reducing the price of the same work. Recalculate the new cost and contribution rather than assuming the original percentage still applies.
This answer derives the recovery formula algebraically from contribution. The SBA reference supplies the basic contribution-and-fixed-cost context, not a recommendation to discount. Start with contribution versus profit if the distinction is unfamiliar, or use the HVAC discount recovery calculator.
About the examples and sources
The figures are hypothetical teaching examples created for AskToBot, not surveyed prices or recommended industry margins. The linked references explain the underlying concepts; they do not supply or endorse these example figures. The arithmetic is checked against the stated assumptions. This is AI-assisted educational content and has not been independently reviewed by an accountant. Read how we check calculations.
Sources & references
- Break-even point — U.S. Small Business Administration
