Free Small Business Help and Resources

Discover Free Small Business Help in South Dakota Twitter Facebook Pinterest Linkedin GooglePlus Ask Dr. Deborah Small Business Financing With Dr. Bill
Train myBiz
Train myBiz

5 Step Venture eMentoring Program™

Session 3: Cost & Income Forecasting

Module 3c: Forecasting Breakeven

If you don't have any Fixed Expenses, and as long as you sell your products / services at least above your cost, you do not have a Breakeven issue. If you do have any Fixed Costs, you need to understand how much more business you must do to cover these costs before you start to make a profit. This additional level of sales is called your "Breakeven." It is where your business operation does not make a profit or show a loss.

In the preceding exercise you divided your expenses into the two categories of Variable Costs and Fixed Costs. You also calculated your Gross Profit. The Gross Profit is the amount that is left over when you subtract your Variable Costs from your Revenue. So the question is, how many times do you need to repeat this transaction before you have accumulated enough to cover your Fixed Costs? Here is a link to a short article that further explains Breakeven Analysis: www.buzgate.org/8.0/nh/ft_beven.html.

In its simplest form, you calculate your Breakeven by dividing your Fixed Costs by your Gross Profit. For example:

Whirligig Breakeven Analysis

a. Unit Price $25
b. Unit Cost $15
c. Gross Profit (a-b) $10
d. Fixed Costs $160
e. Breakeven (d/c) 16 units

In the example, sales of 16 units are needed to cover the Fixed Costs of $160. To get this amount, divide the Fixed Costs by the Gross Profit (160/10=16). That means, before you can actually have any profits you must sell more than 16 units.

The following Worksheet will help you calculate the amount of business you need in order to reach a specific net revenue goal. You can use the data from the proceeding exercise or you can experiment with different amounts to see the effect of changing your pricing or expenses.

Your Breakeven Analysis

a. Unit Price $
b. Unit Cost $
c. Gross Profit (a-b) $0.00
d. Fixed Costs $
e. Breakeven (d/c) 0.00 Units

Submitting the form (* = required)
*Your email address
(to receive a copy of this form)
Send Copy To eMentor
Your Name
(*required if sending a copy)
Anti Spam
Powered by sweet Captcha

View our privacy policy


Newsletter Subscribe

BUZGate.org is an award-winning entrepreneurial education and resource community serving small and medium-sized businesses. Content promotes awareness and access to free government and nonprofit assistance programs and select business-to-business products and services tailored to driving venture startup, growth and profitability.

NHBR Business Excellence Award SBA Business Champion New Hampshire Business Review Award Enterprising Woman of the Year Award MSNBC\'s Site of the Week Kim Komando\'s Site of the Day

As featured in:
Wall Street Jounal Los Angeles Times Business Week Inc. Magazine WPIX News Forbes AOL Money and Finance The Adams Report Reuters Yahoo! Finance State House News Service

Thanking our Champions of Small Business Education and Development. View All

Free Sitemap Generator