Break Even Analysis In Business Plan

How can you tell if your business idea will be profitable? But this uncertainty shouldn't keep you from researching the financial soundness of your idea.

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Calculating the Break-Even Point After attributing all costs to bringing your product or service to market are deducted, a certain amount of profit remains for each unit sold.

This contribution to your profits is divided into fixed costs, which will determine how many units you need to sell to break even.

But you still need to figure out how much profit your business will generate and whether you'll have enough cash available to pay your bills when they are due.

In short, a break-even forecast is a great screening tool, but you need a more complete analysis before you start investing real money in your venture.

Simply divide your estimated annual fixed costs by your gross profit percentage to determine the amount of sales revenue you'll need to bring in just to break even.

If You Can't Break Even If your break-even point is higher than your expected revenues, you'll need to decide whether certain aspects of your plan can be changed to create an achievable break-even point.

You should do some serious research--including an analysis of your market--to determine your projected sales volume and your anticipated expenses.

Business plan books and software can teach you how to make reasonable revenue and cost estimates.

To calculate your average gross profit percentage, divide your average gross profit figure by the average selling price.

Calculating Your Break-Even Point Once you've calculated the numbers above, it's easy to figure out your break-even point.


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