Raise your hand if you know what a break even analysis is.
Hmm, I see a few hands raised. And I see a few more of you, with your hands not quite raised, are not quite sure. Right? Maybe you’ve never even heard of it. And maybe you’d rather not hear about it now.
Well, here’s something I found called “Interpretation of Break Even Analysis”
~ A break even analysis helps you figure out when total fixed and variable costs are equal to total revenues. And where they meet is called the break-even point. At the break-even point, a business does not make a profit or loss. Therefore, the break-even point is often referred to as the “no-profit” or “no-loss point. ~
OK, does it make sense so far? Good. Here’s a little more explanation I found.
~ The break-even analysis is important to business owners and managers in determining how many units (or revenues) are needed to cover fixed and variable expenses of the business.
Therefore, the concept of break-even point is as follows:
- Profit when Revenue is greater than Total Variable Cost + Total Fixed Cost
- Break-even point when Revenue = Total Variable Cost + Total Fixed Cost
- Loss when Revenue is less than Total Variable Cost + Total Fixed Cost ~
Fun stuff, right?
Yeah, probably not so much. And that’s probably why most business owners don’t set any of it up before they start a business. Because, after all, when you’ve got ideas, you wanna get right to work making those ideas into a profitable business. And that’s totally understandable.
After all, you started your business so you could take pictures, or build cabinets, or sell lots of stuff online. But you sure didn’t come up with your great business idea just so you could calculate boring numbers. Right?
I get it. Because I’m like you. I’d rather do the work I love than have to do the calculating stuff like projections and pivot tables. But it’s important to know if your business is making (or is gonna make) enough money to support you. And when you know your numbers, you’ll be able to adjust as necessary. Maybe you’ll need to raise or lower your prices. And maybe you’ll need to hire some help for the “boring” break even analysis part.
Boring as it is, it’s important to figure out and know your sales revenue and your fixed and variable costs. And what your contribution margin is. Because the contribution margin directly influences your net profit. And you want that net profit as high as possible. Say it with me, “High profits good! No profits bad!”
Calculate your numbers. And then you can start playing. Price adjustments. Possibly lower expenses. Fixed and/or variable.
All of this is part of what I call the Be Ready stage in my RondaReady business management system. It’s where you develop strategies for steady income and higher profits. Remember, you’re a CEO. It’s part of your job description to know this stuff.
So, where is your break even?
Does it seem too overwhelming to keep track of your numbers and performance measurement? And how about making projections, analyzing, and tweaking when necessary? When you’re Ready to set this kind of work up with a proven system, consider the RondaReady System.
But just so you know, mine isn’t for everybody. Just the ones who are ready to invest in themselves and their business. The ones who understand the value of being a highly organized CEO instead of staying on the self-employed hamster wheel.And the ones who understand that RIGHT NOW there’s a huge opportunity for people who aren’t letting fear rule their decisions.
Right now being proactive instead of reactive can put you way ahead of your competition.
A great way to do that is to get your own copy of the RondaReady System book, today. Because so much of your so-called “competition” isn’t doing this kind of work. So, make a move now and get Ready to Be Ready and…
Stay Ready,
R.O.N.D.A.
Responsive Organized Nonstop Development Authority
(https://www.amazon.com/RondaReady-Online-Business-Coach-System/dp/1688796479)