This also helps you in setting long term goals. When you know exactly how many units you need to sell to reach the break even point, it becomes easier to plan ahead of the time. This provides motivation to work toward your goals and forms a Key Performance Indicator (KPI) that your sales and operations teams can use as a tangible benchmark for success. A break even point could be an ongoing target, say 20 units per week. Once you know the number of break even units, it will give you a target which you and your staff can aim towards. Let's take a detailed look at how you can use the calculations to leverage a lower break even point and boost business profitability: Setting Business Goals (Key Performance Indicators)
This may require cutting costs or increase in selling prices. Calculating the point at which your business starts to become profitable is just the beginning, there is much more to do once you have a target number in your hand you can start working on your sales strategy, marketing and other financial planning elements of your business strategy.Īfter the number crunching you may have to figure out a way to reach the break even point as soon as possible. The break even analysis helps you calculate out your break-even point.
You can use the calculator to compare profit margins with competitor startups or to benchmark your current break even point against planned break even points as an internal KPI. The calculator is online and gives you 24X7 access to the details about your break even units so you can always complete a sanity check if you are worrying about your business finances in relation to specific product lines or services. You just have to enter a few details to get the results that can provide visability of your financial investment in the business in many ways. It is a simple tool for a significant calculation. Using the calculator could be really useful, especially for startups: Ideally, Break-Even calculations should be done before you start a business, launch a new product or start to offer a new service. Net Profit - This will be the amount of profit, if any, you will be making on the expected units sold, before the break even point.īreak Even Units = Revenue per unit - Variable cost per unit / Fixed cost Benefits of Using a Calculator. Total cost - This will show you the total of fixed and variable costs that will occur before reaching the break even point. Total Revenue - This will be the amount of total revenue you will be making by the time you reach break even point. In addition to that, the calculator will also show you the following information: On the basis of values entered by you, the calculator will provide you with the number of units you would require to reach a break-even point. Expected Unit Sales - It's the expected number of units that you are going to sell. Selling Price per Unit - It is the price of the product per unit that you are selling. Variable Cost per Unit - This refers to the amount that you spend to produce each unit of the products you are selling. This is to be noted that fixed costs are not affected by the number of units. It will include the cost of basic infrastructure, monthly rent, employee salaries, etc. Fixed Cost - It is the total amount that you have invested to start a new business. To calculate the break-even point you will have to enter the following values in the calculator: The break even calculator tells you exactly how many units would you need to sell, to reach the break even point. Once you have reached the break even point, any additional income generated after that point could be considered as profit. It also covers any fixed and variable costs incurred on a monthly basis. It is that point of time when your business has generated enough revenue to cover your initial cost. Break even point analysis is an important part of planning any start up. At the same time, it is essential too think realistically when starting up a new venture. Start ups are exciting, but demand a lot of planning, attention and consistent effort. If you are looking to make and investment or startup your own business, it is important to know your break even point first. #COST PER UNIT CALCULATOR FULL#
Break-Even Point: The Full Recovery Point of Your Investments
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