Are You Aware Of Your Business Success Point?

The number of units they will sell in order to cover their running costs is a matter of concern for all business owners. When you are at the point of break-even, you will celebrate: you're no longer in the red and you make a profit officially.

This article will show you how your break-even point can be measured to allow you to make wise business decisions that encourage further growth.

Why is your break-even point important?

Enterprises who seek to run a business without knowing if or not they will be successful will probably not survive for a while. Knowing your tipping point is useful if you want to invest in growth or decide on the viability of your business (e.g. cost-benefit analysis).

Another significant benefit is the precision of your budgets and forecasts to know exactly how much you need to raise to start profit growth.

What are your fixed costs?

In determining your break-even point, the first move is to list your stable, continuous monthly expenses.

Employee salaries
Rented or leased office space
Office expenses
Rented or leased retail space
Insurance
Utilities (e.g. heat, electricity, phone service, internet)

Make sure you have the most reliable figures on your break-even sheet – adding 10 percent extra to cover unexpected various expenses.

List your variable costs

The business expenses that vary month by month will be taken into account as well. Calculate an average monthly cost to be as reliable as possible by measuring your variable expenditures over two to three months.

Examples of products for which monthly forecasts should be included are:

Labor
Inventory
Commissions
Delivery fees
Shipping costs
Interest fees

You will now calculate how much you need to sell to hit your break-even point on the basis of your fixed and variable monthly costs.

In the following format, enter the following issues in order to find the break-even point for each product or service you offer:

the price of each item for sale
your company’s fixed overhead costs
each unit’s variable costs

Fixed costs ÷ (unit sales price – variable costs)

To ensure that you always make business decisions with the most reliable and up-to-date details, make it your habit to update each quarter.

Reliable Bookkeeping Services Melbourne is a top-rated bookkeeping firm, provide services large to small business by expert bookkeepers Melbourne.

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