Is your business breaking even?
If you don’t know the answer to this question, you need to find out as soon as possible what your accurate breakeven is and how your current sales are stacking up against it.
If you are starting a new business, a break-even analysis can be a really good tool, as it can help to decide whether the business idea is viable. It also provides you with information you can use when designing your pricing strategy.
Generating enough sales to reach a high breakeven point can be difficult to achieve in the current climate. To overcome this, you may want to consider:
- Can you reduce any of your costs such as overhead expenses and owners’ drawings?
- Is it possible to increase the price of any of your products/services without causing a drop in sales?
- Can you diversify your service/product offering to appeal to current consumer demands (without significantly increasing costs)?
Why is breakeven important?
- Profitability: Helps assess the minimum level of sales needed to cover all costs.
- Decision making: Breakeven helps with various decisions such as pricing, products, investments etc.
- Financial planning: It can play a crucial role in financial planning and budgeting, it can help to enable you to develop strategies to achieve profitability.
How often should you be doing a break-even analysis? This does depend on the nature of your business. Some businesses opt for calculating their monthly break-even point, others opt to perform a break-even analysis yearly.
To help you calculate your business Break-Even Point and Survival Days, we’ve produced a simple guide for you.
Watch our short video on break-even analysis
Get in touch
We’re focused on helping our clients boost growth and maximise profitability throughout these challenging times. If you would like to find out how we can help you with this, please contact us at info@oldfieldadvisory.com or call 02476673160.
Please note: This article is provided for information only and was correct as at time of writing (20/03/24). Any lists and details provided above are not exhaustive and are not intended to be full and complete guidance. No action should be taken without consulting detailed legislation or seeking independent professional advice. Therefore, no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this article can be accepted.
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