What the sales hurdle assumes

The idea in plain words

Every sale leaves something behind after paying for the item, getting it to the customer and any fees. That leftover is contribution: money that goes toward overhead and profit.

Change the price and two things move at once: the leftover from each sale, and (probably) how many sales you make. The sales hurdle answers one question. How many sales would the new price need to leave you with the same total contribution as today, and also cover any extra campaign spend?

It does not say whether you will reach that number. It tells you what you would need to believe before the change makes sense.

What goes into the leftover per sale

• The price you actually receive, after discounts and excluding sales tax.
• Variable cost per sale — the item, fulfilment, shipping subsidy, expected returns. These stay the same whatever the price.
• Percentage fees — payment or marketplace fees charged as a share of the price. With a fixed rate, the fee in dollars falls when the price falls. At a 10% fee, a $25 sale pays $2.50 in fees; at $22.50 it pays $2.25. The tool applies the rate to each option’s own price for that reason.

What “today” means — and when it doesn’t work

The comparison point is today’s price with your usual sales for a comparable period, with no campaign. That only works if those sales could actually happen again in the period you are planning:

• the product was in stock throughout the period you took the sales from;
• you can supply at least that many units in the coming period;
• nothing else that drove those sales (a season, a promotion elsewhere, a competitor being out of stock) has disappeared.

If the stock you enter is below your usual sales, the tool still shows the hurdles but pauses its verdicts on sales ranges. Last period’s sales are not a fair yardstick until availability is sorted out.

When no number of sales is enough

If the new price leaves nothing, or a loss, on each sale after costs and fees, then selling more cannot rebuild a positive amount: today’s contribution plus any campaign cost. The tool shows this instead of a hurdle.

If today’s contribution is itself zero or negative, there is nothing positive to protect. The tool asks you to check the starting economics before comparing prices.

Why the hurdle grows so quickly

The hurdle divides the amount to recover by the leftover per sale. As a discount eats into that leftover, each sale contributes less, so you need disproportionately more of them. When the leftover per sale gets close to zero, the hurdle shoots up.

In the $25 example, where each sale leaves $12 today, 5% off needs 11.6% more units. 10% off needs 26.3% more — more than twice as much for twice the discount.

Exact and whole-unit hurdles

The tool shows the hurdle two ways. The exact value — 189.47 units for $22.50 in the example — is useful for percentages and planning averages. The whole-unit value — at least 190 — is what you would actually need to sell.

What the calculation leaves out

• Overhead — rent, salaries and other fixed costs sit outside both sides of the comparison.
• Timing — when sales happen within the period, stock arriving partway through, and cash flow.
• Related products — sales of other items that a discount pulls along or takes away.
• Competitor responses — a rival matching or undercutting your new price.
• Deferred purchases — customers who would have bought later at full price, or who wait for the next promotion.
• Longer-term effects — new customers who come back, or customers who learn to expect discounts.

It is also not an optimal price. The tool compares the options you enter; it does not search for the best price or estimate how customers respond.

The formulas (optional)

With price p, variable cost c per unit, percentage fee rate f, usual units q₀ at today’s price p₀, and added campaign cost C:

• Contribution per unit: u(p) = p × (1 − f) − c
• Today’s contribution (no campaign): B = q₀ × u(p₀)
• Hurdle: q* = (B + C) / u(p), defined only when u(p) > 0, and compared only when B > 0

The hurdle is a required response, not a forecast and not a profit break-even.

Test it in the tool