How well do you know your breakeven point?
Most people are familiar with the concept of breaking even. Your breakeven point tells you how many units you need to sell or what dollar value in sales you need to achieve just to cover your costs. Once you know that, you know the point you need to pass to turn a profit.
Pretty Easy right?
But a breakeven point isn't set in stone. It will shift as your business grows, costs fluctuate and as you continue to surf a constantly changing business environment.
Monitoring Breakeven
A breakeven point therefore becomes something you keep in play over time as a tool for you to think about your sales, costs and pricing in a different way. For instance, say you know your breakeven point and you take it at face value. Tell your team. It's a powerful motivator for your sales people to know exactly what the numbers are to the business in profit.
Say you don't accept your breakeven point at face value. What can you do? Can you reduce your costs to lower your breakeven point so you can start earner profit sooner? That might lead you into analysis of your fixed and variable costs to judge whether you have room to move.
Or does your breakeven point uncover an issue with your pricing that you need to deal with? Lifting your pricing might mean your numbers are into profit sooner but you might have to think about whether your market will tolerate that. Does that line of thought indicate that you simply have to lift your sales volume? And then you're looking at marketing strategies, market reach and coaching your team on what the sales goals really are.
Pretty Easy right?
But a breakeven point isn't set in stone. It will shift as your business grows, costs fluctuate and as you continue to surf a constantly changing business environment.
Monitoring Breakeven
A breakeven point therefore becomes something you keep in play over time as a tool for you to think about your sales, costs and pricing in a different way. For instance, say you know your breakeven point and you take it at face value. Tell your team. It's a powerful motivator for your sales people to know exactly what the numbers are to the business in profit.
Say you don't accept your breakeven point at face value. What can you do? Can you reduce your costs to lower your breakeven point so you can start earner profit sooner? That might lead you into analysis of your fixed and variable costs to judge whether you have room to move.
Or does your breakeven point uncover an issue with your pricing that you need to deal with? Lifting your pricing might mean your numbers are into profit sooner but you might have to think about whether your market will tolerate that. Does that line of thought indicate that you simply have to lift your sales volume? And then you're looking at marketing strategies, market reach and coaching your team on what the sales goals really are.
