Enter an original price and markdown percent to get the sale price and savings — and, if you add your cost, the margin you keep after the markdown.
A markdown discounts the selling price. Make sure the sale price still clears your cost — deep markdowns can wipe out or reverse your margin. General information.
A markdown cuts the price by a percentage. The trap is margin: a 25% markdown on a product with a 40% margin can leave almost nothing — always check the sale price against your cost before discounting.
Sale price = original × (1 − markdown%) · Margin = (sale − cost) ÷ sale
A markdown reduces the selling price by a percentage: sale price = original × (1 − markdown). That part is trivial. The part this page exists for is the second calculation — the margin left afterwards — because a markdown takes its entire bite out of profit, not out of cost. Your cost per unit does not move when you run a sale. Every dollar of discount comes straight off the gross profit line.
The defaults are an $80 original price and a 25% markdown. Sale price is $80 × (1 − 0.25) = $60, and the customer saves $80 − $60 = $20. So far so harmless. Now enter a cost, which is the input most people skip. At a $48 cost, the item was carrying a (80 − 48) ÷ 80 = 40% margin and $32 of profit at full price. After the markdown the margin is (60 − 48) ÷ 60 = 20%, and profit per unit is $12.
Read that as a volume question and it gets sharper: profit per unit fell from $32 to $12, so to bank the same gross profit you now need $32 ÷ $12 ≈ 2.7 times as many units. A 25% markdown that lifts sales by 50% is a loss. It has to nearly triple them to break even on profit.
The floor is worth knowing too. At a $48 cost on an $80 price, you break even at a markdown of 1 − (48 ÷ 80) = 40%. Anything deeper than 40% off sells at a loss on every unit — sometimes the right call to clear dead stock, but it should be a decision, not a surprise.
As a rule of thumb, the thinner your original margin, the shallower your safe markdown: an item at 50% margin can take a 25% cut and still keep 33% margin, while an item at 30% margin (cost $56 on our $80 item) drops to about 6.7% margin and $4 a unit at the same 25% off. Before running any sale, work out the break-even markdown depth and treat it as a hard floor. And be honest about why you are discounting: clearing seasonal stock, buying a first order from a new customer, and "everyone else is running a sale" have very different payoffs, and only the first two reliably justify permanent margin damage.
Confusing markdown with margin. A 25% markdown is not a 25% margin hit — in our example it cut margin by 20 percentage points, from 40% to 20%, i.e. half the profit.
Marking down from an inflated "original". Advertising a discount from a price nothing ever sold at is a consumer-protection problem in many jurisdictions as well as a trust problem. Rules vary by country and state; check yours.
Stacking markdowns on top of a coupon. 25% off then a further 10% code is not 35% off — it is 32.5% off, and on our example it lands at $54, only $6 above cost.
Ignoring the fees that come off after the sale price. On a marketplace taking roughly 10%, the $60 sale nets about $54 before cost, which is $6 of profit, not $12.
One item at one markdown is a calculator problem. A whole sale is not: you need cost, price, markdown and resulting margin per SKU, sorted so the items that cannot take the discount are obvious before you publish it. A pricing sheet in our Small Business Bookkeeping workbook does exactly that — a row per product with the break-even markdown computed for you. Use this calculator to sanity check one price; use a sheet before you discount a catalogue.
Same math — both cut the selling price by a percentage. "Markdown" is the retail term for permanently lowering a price or running a sale.
Only until the sale price meets your cost (break-even) — below that you lose money on every unit. Enter your cost above to see the line.
Related: discount calculator · profit margin calculator · markup calculator · all free calculators.
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