Promotions Methodology
How every SmallBizMath promotion calculator works, and exactly what "profit" means here.
Core definitions
- Revenue — the amount actually paid by the customer for the order.
- Product cost — units delivered × unit variable cost, plus any gift cost.
- Payment fee — Revenue × fee% + fixed fee, if configured.
- Contribution profit — Revenue − Product cost − Payment fee − Seller-paid shipping.
- Contribution margin — Contribution profit ÷ Revenue.
Contribution profit = Revenue − Product cost − Payment fee − Shipping subsidy Contribution margin = Contribution profit / Revenue (undefined when Revenue = 0) Required volume uplift = Baseline profit / Promo profit − 1 (only when Promo profit > 0)
Gross margin vs. contribution profit
These calculators report contribution profit — profit after variable costs, payment fees and seller-paid shipping, but before fixed overhead like rent, salaries and software subscriptions. This is deliberately not called "gross margin" or simply "profit," because it excludes fixed costs entirely. Use contribution profit to compare promotion mechanics against each other; use your full P&L for overall business profitability.
Rounding
All internal math uses full floating-point precision. Currency displays round to cents below $1,000 and whole dollars above; percentages display to one decimal place.
What is and isn't included
Included: unit price, unit cost, optional percentage and fixed payment/marketplace fees, optional seller-paid shipping or subsidy, and gift cost where relevant.
Not included: fixed overhead, marketing spend to drive the promotion itself, inventory holding costs, or demand elasticity (how many more units a discount will actually sell). The "required volume uplift" figure is a break-even requirement, not a demand forecast.
Why this is a planning estimate
These tools tell you what a promotion costs in profit terms and how much extra volume would be needed to break even — they do not predict customer behavior. Treat the required uplift as a target to validate against your own promotional history, not a guarantee.