A 10% discount feels harmless.
Until you see what it does to your net profit.
Here’s the teardown founders rarely run…
You may know a founder who says things like “We’ll make it up in volume.”
That founder may be tempted to run a small promo to “wake up” a flat quarter.
Let’s say you pull out the P&L (Profit and Loss Statement) and do the napkin math together.
A baseline year might look like this:
- Revenue: $4.0M
- COGS (Cost of Goods Sold): $1.0M (25%)
- Operating Expenses: $2.5M (62.5%)
- Net Profit: $500k (12.5%)
Now let’s try a simple 10% off…
- Revenue drops to $3.6M
- COGS stays $1.0M (now 27.7% of revenue)
- OpEx (Operating Expenses) stays $2.5M (now 69.4% of revenue)
- Net Profit collapses to $100k (2.7%)
That “tiny” discount just gutted 75% of the profit.
And if you had pushed to 15% off? You’d be losing money.
This is why “more volume” so often digs the hole deeper: your fixed expenses don’t shrink when you slash price. Your gross profit percentage falls, your expense percentage balloons, and the money that actually funds growth – net profit – evaporates.
We’ve all seen how this plays out at scale. Run steep promos to move inventory… margins get crushed… credit tightens… layoffs follow. You cannot discount your way to profitability.
So what do you do instead when growth plateaus?
Raise value before price: improve packaging, bonuses, onboarding, speed, access, or personalization so the higher price is obvious.
Price for profit, not hope: know your floor and stick to it; if you need demand, fix acquisition and conversion, not price.
Reward loyalty, not strangers: perks or bundles for members/continuity buyers beat blanket discounts that train everyone to wait.
Measure reality: Model any promo against your P&L, not vibes. If net profit falls, it’s not a “sale” – it’s a subsidy.
🧠 Key Takeaway
Small discounts destroy big profits. A 10% price cut can nuke three quarters of your bottom line. If you’re feeling stuck, fix value, offer design, and funnel math – not price.
What’s one discount you’re killing after seeing this math? Share your thoughts!