✦ Behind The Numbers — Season 2 · Issue #1

Why Discounts Are the Biggest Mistake You Can Make in Your Business

A 20% discount seems harmless — until the numbers show you need 100% more sales just to break even

By: Yasser | July 2026 · 6 min read

🏷️ When sales slow down, the first idea that comes to any business owner's mind is: "Let's run a discount." It sounds logical — more people buy, revenue goes up. But what nobody tells you is that discounts might be the fastest road to losing money.

The Story: A 20% Discount That Became a Crisis

📖 A Real Story — A Café That Tried Discounting Its Way to Growth

The café sold a cup of coffee for SAR 20 with a profit margin of SAR 8. The manager decided to launch a 20% summer discount to attract more customers — bringing the price down to SAR 16.

Sales went up 30%. Everyone was happy. But at the end of the month, profits had dropped instead of rising. How?

The math was wrong from the start. 🔽

The Calculation Nobody Ran

Item	Before Discount	After 20% Discount
💰 Selling price	SAR 20	SAR 16
🫘 Material cost	SAR 12	SAR 12
📈 Profit margin per cup	SAR 8 (40%)	SAR 4 (25%)
☕ Daily sales	200 cups	260 cups (+30%)
💵 Daily profit	SAR 1,600	SAR 1,040

⚠️

Sales went up 30% — but profits dropped 35%

The discount didn't help the café. It added more operational pressure (more purchases, more staff load) while delivering less profit.

Daily loss: SAR 560 × 30 days = SAR 16,800 per month.

The Question That Should Have Been Asked First

Before any discount, the right question isn't "how much do we cut?" — it's: "How much more do we need to sell just to compensate for this discount?"

Discount %	Sales increase needed to compensate
5% discount	+14% only
10% discount	+33%
15% discount	+50%
20% discount	+100% (double your sales!)
30% discount	+300% (nearly impossible)

When you offer a 20% discount on a product with a 40% margin, you need to double your entire sales volume just to stay at the same profit level. Is that realistic? Rarely.

-35% Profit drop despite 30% more sales

16,800 SAR monthly loss from one "simple" discount

100% Sales increase needed to offset a 20% discount

5% Safe discount if your margin is 40%

So Why Does Everyone Default to Discounts?

Because they produce an immediate, visible result — more people buy, the place looks busy, and the manager feels like something was done. But the illusion fades at month-end when the real numbers appear.

⚠️ A discount solves one problem and creates three

It brings in new customers ✓ — but it also devalues your product in the customer's mind, trains them to always wait for a deal, and cuts your margin exactly when you need it most.

Smarter Alternatives to Discounting

• 1
  Add value instead of cutting the price Instead of 20% off — add a free product that costs you SAR 3. The customer feels the value and you protect your margin
• 2
  Loyalty program instead of direct discount Every 10 cups = 1 free cup. The customer returns more often and you don't lose on every single transaction
• 3
  Volume discount instead of product discount "Buy 2, get the 3rd at half price" — raises average order value instead of cutting your margin
• 4
  Time-limited discount with a clear objective If a discount is necessary, make it 48 hours only with a specific goal — clearing inventory or a seasonal event

"A discount isn't a strategy — it's an admission that you haven't yet convinced the customer of your product's value."

The Bottom Line: Discounts Are a Tool, Not a Solution

Discounts aren't inherently wrong — the mistake is using them without running the numbers first. Before any discount, ask yourself: how much more do I need to sell to compensate for this cut? And is that increase actually realistic?

If the answer is no — you're not selling more. You're donating your profit.

📌 Next on Behind The Numbers

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Behind The Numbers | وراء الأرقام — Real stories. Clear numbers. Useful lessons.