With the illustrative inputs below, the result is 28.5714 %.
Try this with your own numbersFormula and worked example
Maximum discount = (1 − annual cost / ((1 − margin) × monthly price × 12)) × 100
| Input | Example |
|---|---|
| Monthly customer price | 100 |
| Annual delivery and support cost | 600 |
| Required annual margin | 30 % |
| Calculated result | 28.5714 % |
Choose reliable inputs
Include software licences, delivery time, revisions and ongoing support when costing a project. For this paid media agency calculation, use project time logs, licence invoices and retainer scopes and a consistent definition of one client month.
- Account management: include the portion belonging to this client month or reporting period, and record where the value came from.
- Creative: include the portion belonging to this client month or reporting period, and record where the value came from.
- Reporting: include the portion belonging to this client month or reporting period, and record where the value came from.
Use the same currency for every money input. Do not mix weekly costs with monthly revenue, or count the same expense in both an itemised cost and allocated overhead.
Can collecting annual cash justify any discount?
This margin test excludes the value of earlier collection. A negative ceiling means the undiscounted price misses the target.
What if this input changes?
If monthly customer price rises by 10%, this example changes by 6.4935 %. This shows the effect of one change; it does not predict what will happen.
Open the calculator, save your baseline, then change the input supported by the least reliable estimate in your records. Compare both scenarios before committing to a price or capacity promise.