How it works
Profit per sale now = price − cost
Profit per sale after = new price − cost
Sales you can lose = 1 − (profit now ÷ profit after)
Extra sales a discount needs = (profit now ÷ profit after) − 1
The result keeps total gross profit the same. A price increase adds its whole amount to profit per sale, so a few lost customers are easily covered. A discount takes its whole amount out of profit per sale, so you need many more customers to break even.
A worked example
A pressure-washing company charges $100 per driveway; each job costs $40 in fuel, chemicals and a helper’s time. Profit is $60 a job on 100 jobs a month: $6,000.
Raise the price 10% to $110 and profit per job becomes $70. He could lose 1 − 60/70 = 14.3% of jobs, 14 of 100, and still make $6,000. Cutting the price 10% instead drops profit per job to $50, so he’d need 20% more jobs just to stand still.
Common mistakes
- Assuming every customer will leave. Customers who value your service often stay, especially when the increase is explained.
- Comparing revenue instead of profit. Fewer customers at a higher price can mean less revenue and more profit, and less work.
- Running discounts without doing this math. A 20% discount on a 40% margin needs twice the sales to break even.
What this doesn’t tell you
This compares gross profit only and assumes your cost per sale stays the same. It can't predict how your customers will react; that depends on your market, your competition and how you communicate the change. Fewer customers can also free up time and capacity, which this doesn't count.
Related calculators
Go deeper: 15 Numbers Every Small Business Owner Should Know, from The Groundwork Review.
Anticipated Questions
How much should I raise prices?
There is no single right number. Use this calculator to see the risk you can afford, then watch cancellations for a month after the change.
Should I tell customers before I raise prices?
Usually yes. Give notice, say what's changing and when, and keep the message short and confident. Existing customers can sometimes keep the old price for a set period.
Why does a discount hurt so much more?
Because the discount comes entirely out of your profit per sale, while your costs stay the same. The thinner your margin, the more extra sales a discount needs.
Does this work for subscriptions or retainers?
Yes. Use the monthly fee as the price, your monthly cost to serve each customer as the cost, and your customer count.
Sources
Last reviewed October 19, 2026. How our calculators work. General information for planning, not legal, tax or financial advice. Found an error? Email info@groundworkbusinessadvisory.com.
