August 24, 2015

Why you should know your Break-even Point

Mark Hann, Director

It is critical to know the break-even point of your business, which can provide a good guideline to quickly assess profitability from actual sales performance.

The break-even point is simply the point at which costs (direct and fixed) are covered by sales and the business moves into profit. It can be valuable to calculate the break-even point relating to annual, monthly, weekly and even daily time frames.

Graphing your sales, break-even and profit figures each month provides a clear and instant picture of performance.

Knowing your break-even point means you can review costs and identify exactly where savings can be made, as well as introduce timely management strategies to improve profitability.

Astute business owners can then adjust quickly to falling sales, often making greater profits during economic downturns.

Calculate your sales and break-even data at least once a month and you can then quickly measure if break-even sales are below actual monthly sales.

Tactica can help you work through this process, so if you recognise the importance of this to your business please contact our office and ask to speak to Mark Hann.

Please Note: Many of the comments in this article are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.

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