Have you ever accurately calculated just how much work you need to turn over to cover your running costs and fixed expenses? This measure, known as the break-even point, is an immeasurably important step in ensuring business development and growth. It goes without saying that without it, things could turn south very quickly.
Simply said, if you don’t know your break-even point, then how do you know when you’re making a profit? Before you start feeling frustrated about this often irritating little detail of business, the good news is that’s all about to change. We’ve created a free, very simple break-even calculator to help you figure out the break-even point for your business right now. All you need are some accurate financials and in three easy steps, you’ll have your measure.
Step 1: Source an accurate copy of your profit and loss. Note it’s imperative that your numbers are as accurate as possible, otherwise the result won’t mean a thing. So make sure the income and expenses listed in your P & L are up to date and accurate.
Step 2: Ensure that you’ve separated your ‘Cost of Sales’ from your ‘Running Costs’ or ‘Fixed Costs’. If you’re unsure about this, make sure you ask your bookkeeper, and if they’re unsure, give us a call we’ll walk you through it.
Step 3: Punch your numbers into the yearly or quarterly space on the calculator and hit each of the three calculate buttons to figure out your gross margin, break even and net profit figures.
Start Here >> Breakeven Calculator
Now here’s the thing – once you’ve calculated your break-even point, you can play around with the numbers and gauge the result to your bottom line. You can also use the top part of the calculator to work out your gross margin on individual jobs and find your most profitable work. Chances are 80% of your profit is coming from 20% of your work.