Do you know your “Break Even” Point?

Have you ever wondered how much work you need to turnover and at what profit margin to exactly cover your “running costs” or “fixed expenses?”. In other words have you ever accurately calculated the Break Even Point for your business?

If you’re even mildly curious about your “business development” you’ve probably at least thought about your break-even point but maybe you never found the time to figure it out or you never had a user friendly calculator to punch your numbers into and get the result, right?
The fact is if you’re in business and 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 very simple Free, Break Even calculator to help you calculate the break-even point for your business right now. All you need are some accurate financials, then click the link and follow the three easy steps below to calculate your break-even point in two minutes flat;

Start Here >> Breakeven Calculator

Step 1: Get an accurate copy of your Profit & Loss. Note its 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: Also 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 get your Gross Margin, Break Even and Net Profit figures.
http://kurthegetschwe.wpengine.com/BreakEvenCalculator/break_even_calculator.php
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 when you shave 2% of your Material costs and/or increase your pricing by 4%. 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.
Have fun!

Strategies

Virtually every builder or building contractor we start working with doesn’t have a clearly defined Business Strategy or Goals. The obvious question always is “If you don’t know where you’re going, how are you going to get there?” Most business owners are directionless and stuck on the proverbial “hamster wheel”. They’ve bought themselves a job and each day, week and month is a carbon copy of the next. This is demoralizing and leads to burnout! This section is about changing that.

Would you like more purpose, direction, motivation and Confidence for you and your team?
Once you’ve set a clear Strategy and Business Goals you’ll stop spinning your wheels and start moving your business in a specific direction. This will give you and your team Purpose, Direction, Focus, Motivation and Confidence. Your team will see you as a stronger leader because you’ll be taking decisive action. You’ll also feel more purposeful driving to work each day knowing you’re moving your business in a direction that will give you and your family the lifestyle you deserve.

For more specifics on how we can help your business in this area, contact us direct to book in for your free “Strategy Session” with one of our expert Business Coaches. Lets talk about your business and see how we can take you to the next level.

CASE STUDY:

In the beginning: Joe the Plumber makes a plan

Joe was at his local pub enjoying a cold beer at the end of another hard day when Steve shot through the front door with a spring in his step and in an unusually jovial and happy mood. Joe and Steve grew up together and had been friends since pre-school, both chose plumbing as their profession. Joe was starting to resent Steve’s newly adopted carefree attitude. Ever since he went to that seminar held by that famous business coach eight weeks ago, Steve   seemed lighter, more confident and less stressed than ever before.

“How you doing buddy,” said Joe in as uplifting a tone as he could muster. “Fantastic! Thanks mate, life’s a beautiful thing, isn’t it?” replied Steve. “You in love or something?” asked Joe “As a matter of fact I am,” replied Steve; “I’m back in love with my business”.

Steve’s comments didn’t help Joe’s mood. Lately Joe had been feeling tired and frustrated. He was becoming more and more despondent with his plumbing business. He felt like he was on the proverbial ‘hamster wheel’. Each day was a carbon copy of the next. Although the money he made was ok, Joe felt directionless, a slave to his business and clients. Steve knew Joe well and asked, “Why the long face mate?” Then, before Joe could answer in a sarcastic tone and with a wry smirk, he added, “Just remember, no matter how bad things get, they can always get worse!”

Joe felt comfortable opening up to his life long friend, and told him how he really felt about his business. “Mate, I’m not sure what you’re so in love with, but I’m thinking of going back to work for Fat Frank.” Fat Frank was called ‘Fat Frank’ not only because of his physicality, but because he had the biggest plumbing business in Sydney.

“I’m getting tired of this Steve, I feel like I’m chasing my tail. I’m seriously considering returning to employment and walking away from the stress and responsibility of running my own business.” said Joe. “The money is ok but I’m not sure it’s worth all the extra stress and responsibility,” he continued. Steve let him speak to hear him out. Joe told Steve how he had no game plan or strategy for improving his situation. Ultimately, he had bought himself a job, except now he was carrying the added pressure of running a business and it was weighing him down.

“I know exactly how you feel.” said Steve. And he did, because besides being in a similar situation to Joe only two months previously, Steve had  also spent two years working for Fat Frank before going out on his own.

“Think about it Steve” said Joe “If I work for Frank, I’ll be able to leave work in the afternoons and totally divorce myself from all responsibility. No stress, no worries.” Joe felt a sense of relief and calm just thinking about it. But as they spoke and reminisced about the good old days, Joe remembered Fat Frank’s terrible temper and how it bothered him to take instructions from him.  During those early days, Joe and Steve often spoke about how they would do things differently if they owned Frank’s business.

The more they spoke, the more Joe realised there was a reason he was working for himself; he just wasn’t cut out to be an employee. The realisation didn’t help Joe’s mood, it made him feel stuck, as though he was caught between two bad options. He knew something had to change, he just wasn’t sure what? Joe finally put the question to his trusted friend who always seemed to have the answers to trying and difficult situations.

Steve was quick to respond and told Joe about the website the famous business coach had referred him to during the seminar. These business coaches had packaged all the best real life business ideas and strategies from their collective experience and uploaded them onto a website exclusively for plumbers. Plumbers from all over the world were accessing the information online and then applying it to their businesses. Steve continued, “I soon discovered that the information on the website was both relevant and easy to follow. The first realisation I had after watching the short introductory video was that I had no real plan for my business or my personal life.”

Steve then said, “If I don’t know where I’m going, how am I going to get there? Not having a plan was the reason I plodded along with my business, demoralised and directionless for so long. Not only did I need a plan for my business, but also my personal life.”  “After all, I’m in business for personal reasons not the other way round, right?”
Steve went on to explain that once he was clear on his personal goals his business could then serve as a vehicle to achieve those personal goals. It made perfect sense. “Perfect commonsense,” said Joe. “Something that’s not very common these days,” added Steve, and they shared a laugh.

“Once I really thought about it, I realised I have a lot of things on my wish-list, and I’m not getting any younger,” said Steve with a sense disappointment. Then he added, “There are mates I haven’t seen or contacted in ages. The best man at my wedding, Greg, who lives in London, has been bugging me to come out for a holiday and meet the kids I’m Godfather to.”  Steve spoke about plans for surf trips, bike trips and hiking in Machu Picchu, Peru, all of which seemed like fading, out-of-reach dreams due to Steve’s lack of time and money.

Suddenly Joe felt his mind open up as he had a profound moment of clarity. “That’s exactly what’s been missing in his business and my life! I’ve had zero direction for either my personal or business life.” His face became expressionless as the realisation sunk in. Besides new years resolutions, which rarely lasted more than four weeks, Joe hadn’t set goals since he did a goal-setting course back in College.

In that instant, Joe made a decision to do ‘whatever it takes’ to make his business a success and have it give him the lifestyle he deserved. ‘If other people can do it, so can I’, he thought. He just needed the knowledge that they had; an ability to stay open to new ideas and a strong enough desire to change. Joe knew right then he had strong enough reasons to make changes in his business and his life. After all he had very few alternatives. Of one thing Joe was very certain, before his business could change, he knew HE would have to change first.

Joe finished his beer, gave Steve a big hearty slap on the back, and headed straight for his home office. That night, as Joe typed in the URL for plumberscoaching.com on his laptop, he made a commitment to himself to do every exercise on the plumberscoaching.com program until they were completed, understood, and implemented in his business. This gave a Joe a sudden surge of confidence and hope because if there was one thing he was certain of, when he made a promise to himself he always kept it.

After watching the introductory video Joe’s first exercise was to set personal goals using the wheel of life template in the Planning section of the website. He was both nervous and excited. The exercise required that Joe break his life up into eight different areas and set time weighted goals for each area. There were goals for his career, family and friends, money, fun and recreation, physical health and even personal development and spiritual growth. There were so many things he still wanted to achieve and others that he wasn’t sure he wanted to do anymore. At the end of the hour-long exercise Joe had 45 personal goals all laid out in three-month, six-month, 12-month, two-year, and five-year timelines. He was starting to get a picture of what his life could be like. He knew it wouldn’t be easy but he knew he could do it. Any time he’d wanted something bad enough he’d gone out and got it.

Once his personal goals had been set, Joe’s next exercise was to set business goals along the same timelines as the personal goals and then align the business and personal goals to ensure that when he achieved his business goals, his personal goals would automatically fall into place.

Once he’d set his business and personal goals Joe felt a sense of achievement and excitement creep back into his body. It seemed to come from beneath his solar plexus and rise up through his chest cavity, almost lifting him up out of his chair making him feel lighter than he was. This is what being in business is supposed to feel like. He remembered feeling this way when he first went into business eight years ago and how fired up he’d been during those first six to twelve months. He was almost bursting at the seams with energy and enthusiasm. He remembered what his hopes and aspirations were back then and how people seemed to respond more favourably to him when he felt that way. The past eight years were a blur for Joe now and he couldn’t remember exactly when the fire in his belly had started waning and eventually disappeared. It hardly mattered because now the hope was back and he could feel that fire in his belly again, except this time he would make sure he did things properly.

The next morning Joe called Steve on his way to work. “Mate, I feel like a new man!” Steve could hear the purpose and confidence in Joe’s voice. “That’s great Joe, I’m glad you found some value in the program,” said Steve. Joe told Steve about the goals he’d set and the decisions he’d made to improve both his personal and business life. They compared notes and at the end of it they both felt more motivated and purposeful. They decided that they would buddy up and hold each other accountable to achieving the goals they’d set for themselves and agreed to meet at least once a month to discuss their progress.

When Joe finally finished work for that day he decided to skip the pub and head straight back to the plumbers’ website to review the next step in the coaching program. He was eager to do more work so that he could build momentum in the program and start seeing results in his business. Steve had explained the concept of ‘cause and effect’ and Joe knew the more he put into the program, the more he’d get out in terms of results, and results were what he wanted. The next step in the planning section after goal setting was to write a 12-week business plan. Joe learnt that 12 weeks was proven to be the best timeframe in which to do a business plan. Research had tested longer and shorter periods of time in a variety of small businesses around the world and 12 weeks was shown to be the optimum timeframe. Joe had never done a business plan before and wasn’t sure where to start. Fortunately for him, the plumber’s website had a user-friendly business planning template to help guide Joe through putting together a step-by-step business plan specifically tailored to his business to help move him forward in the direction of his goals.

Although most of the strategies that Joe selected off the business planning strategy checklist were commonsense, Joe soon learnt of the importance of the sequence of the strategies. It was like knowing the ingredients to bake a cake but not knowing the sequence in which to mix the ingredients to get the desired result. The business planning exercise took considerably longer than the goal setting exercise, at least three hours in total. Once Joe had completed the exercise he felt a genuine sense of accomplishment. His plan had 15 goals or projects and each goal had at least 10 sequential steps to ensure their completion over a specific timeline. It totalled 150 steps, which all needed to take place in a certain order for all his goals to be achieved within the 12-week period. Joe printed out the one-page business plan template and put it up on his office wall. He felt more motivated than ever because now he not only had goals, but also a plan that gave him direction, guidance, motivation and confidence. Joe had laid the track and all that was left to do now was put rubber to the road!

Joe and Steve spoke again the next day and arranged to meet over a coffee and compare business plans. They both had different personal and business goals and although Steve was eight weeks ahead of Joe in the coaching program, they found that by reviewing each other’s work, they could give each other objective feedback and hold each other accountable to staying on track with the program. They agreed that meeting once a month to discuss their progress, learnings and challenges would be hugely beneficial for both of them.

 

Three months later…

Joe and Steve were engaged in lively discussion over breakfast at a cosy café in the Eastern suburbs of Sydney. They were both amazed at how much they’d achieved over the past three months. The changes in their businesses had been significant. They were by no means living in a perfect world and they still faced their daily challenges, but they had both laid a solid foundation for growth in their businesses and were excited about the prospects ahead. They spent a good part of the morning reviewing their business and personal goals and each of them mapped out a new 12-week plan for the coming quarter. As they left the café with a renewed sense of purpose and said their good byes, they failed to see the three business coaches and the man with the peculiar hat walk in behind them….

For more specifics on how we can help your business in this area, contact us direct to book in for your free “Strategy Session” with one of our expert Business Coaches. Lets talk about your business and see how we can take you to the next level.