Break-Even Analysis Puts Owners on the Pathways to Profits
By Eugene Peterson
You are in business to make a profit. Understanding and using the principles of break-even and also by knowing what that number is, can help you manage profitability. The break-even point is the point at which costs and expenses and income are equal – there is no net loss or gain, one has “broken even”.
• Predict and measure gross sales volume to achieve and reach break-even, then builds to make a profit.
• Assess early prediction and manage to get back on track to make the profits you need.
• Check current break-even and find ways to lower that benchmark to increase profits. When used as a tool, you can use it to:
• Set price levels
• Target optimal variable/fixed cost combinations
• Determine the financial attractiveness of different strategic options for your company Break-even analysis is a tool to calculate at which sales volume the cost of goods and overhead costs of producing your product will be recovered. It specifically shows business smart managers the point at which your product stops costing you money to produce and sell, and starts to generate a profit for your company. My gift to you is a simple excel spread sheet that will help you make this straightforward calculation.