# Effect of Sales Discounting Calculator

This effect of sales discounting calculator can be used when preparing financial projections for a business plan to show the impact on revenue of offering a sales discount to customers.

When a business offers a sales discount it does so by reducing the selling price and therefore the gross margin percentage of their product. Unless there is an improvement in the level of unit sales and revenue, then the gross margin (profit) of the business will be reduced. This topic is more fully discussed in our tutorial on the Effect of Sales Discount on Financial Projections.

The purpose of this calculator is to show the percentage increase in revenue needed for a business to maintain its current gross margin in the event that it offers a percentage sales discount to its customers.

## Using the Effect of Sales Discounting Calculator

The effect of sales discounting calculator is available for download below and is used as follows:

## Inputs

1. ### Enter the gross margin percentage

Enter the current gross margin percentage of the business.

2. ### Enter the sales discount percentage

Enter the sales discount percentage to be given to customers. For example, if it is proposed to offer a 2.50 discount on the current selling price of 20.00, then enter 12.5% (2.50 / 20.00)

## Sales Increase

1. ### New gross margin percentage

The gross margin percentage of the business will fall when the sales discount is given. The effect of sales discounting calculator will calculate the new gross margin percentage of the business.

2. ### Sales increase to maintain gross margin

In order to maintain the current gross margin, the revenue of the business will need to increase to compensate for the effect of the sales discount and the reduction in gross margin percentage. The calculator works out the percentage by which revenue will need to increase beyond the discounted value.

## Example

1. ### Enter the current revenue

The percentage increase in revenue needed depends only on the current gross margin percentage and the sales discount, and has been calculated in the steps above.

If you want to see an example of this in action, then enter the current revenue of the business, and the effect of sales discounting calculator will calculate the current gross margin, the reduction in revenue due to the sales discount, and the increase in revenue needed to maintain the current gross margin.