How much of our list price do we actually keep after discounts, rebates and freight?
Between list price and what you actually keep sits a waterfall of discounts, rebates, freight and payment terms. Enter each step as a share of list-price sales to see the pocket price and how much of the leakage tighter discipline could win back.
Your assumptions
Worked-example values — replace with yoursThis is an estimate. Check it on your own data.
This is a sizing estimate, not a measured waterfall. A year of invoices shows where the leakage actually concentrates — usually a handful of accounts and SKUs.
Your inputs travel with you into the request, or into the free Margin Scan. Nothing is sent to ADEXMA until you submit a form.
The formula
- leakage % = discounts + rebates + freight absorbed + cost of terms (each as % of list sales)
- pocket price (% of list) = 100% − leakage %
- recoverable = list sales × leakage % × share you can win back
Worked example · the values pre-filled above
Annual sales at list price: $100,000,000 · On-invoice discounts: 4 % of list sales · Rebates and volume bonuses paid: 2 % of list sales · Freight you absorb: 1.5 % of list sales · Cost of payment terms and early-pay discounts: 0.5 % of list sales · Share of the leakage you could realistically win back: 40 % of the leakage
- Leakage = 4% + 2% + 1.5% + 0.5% = 8% of $100,000,000 = $8,000,000 a year.
- Pocket price = 100% − 8% = 92% of list.
- Recoverable = $8,000,000 × 40% = $3,200,000 a year.
Result: $3,200,000 a year
What this assumes
- All steps are expressed against the same base: sales at list price, over the same 12 months.
- The recoverable share is your judgement; it is the weakest number in the estimate.
- Cost of terms is days of credit × your cost of capital, as a percent of sales.
- It is an estimate from your own inputs. Results from different tools overlap and must never be added together into one savings figure.
Sources
- Marn, M. & Rosiello, R., “Managing Price, Gaining Profit”, Harvard Business Review, Sept–Oct 1992 — The price waterfall: list price to pocket price.
- Marn, M., Roegner, E. & Zawada, C., The Price Advantage (Wiley, 2004) — Pocket-price and pocket-margin waterfall method.
- ADEXMA Calculation Catalog · ROI-003 · part of Margin Architecture™.
Questions people ask
What is pocket price?
The price you actually keep per unit after on- and off-invoice discounts, rebates, freight and other concessions. The gap to list price is the leakage.
How do I find my leakage percentage?
Add up the discounts, rebates and absorbed freight for a full year and divide by sales at list price. If you cannot, that is itself the finding: the leakage is not visible in your reports.
Related tools
On your own data, Margot picks up this finding in a workspace and your advisor confirms it. See what each plan adds →