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:
Enter the gross margin percentage
Enter the current gross margin percentage of the business.
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)
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.
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.
Sales Discounting Calculator Example
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.
Sales Discounting Calculator Download
The effect of sales discounting calculator is available for download in Excel format by following the link below.
Users use this effect of sales discounting calculator at their own risk. We make no warranty or representation as to its accuracy and we are covered by the terms of our legal disclaimer, which you are deemed to have read. This is an example of an effect of sales discount calculator template that you might use when preparing financial projections in Excel. It is purely illustrative of a small business sales discount calculator. This is not intended to reflect general standards or targets for any particular company or sector. If you do spot a mistake in the effect of sale discount calculator, please let us know and we will try to fix it.
About the Author
Chartered accountant Michael Brown is the founder and CEO of Plan Projections. He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a degree from Loughborough University.