What is Break even analysis

It is important to identify your startup costs which will help you conclude your sales revenue needed to pay constant business expenses. Understanding your break even point will help you with balancing your money from sales, and managing your costs.

Break Even analysis is used to determine when your business will be able to cover all its expenses and begin to make a profit. It is important to identify your startup costs, which will help you conclude your sales revenue needed to pay constant business expenses.

  • For example, if you have $5,000 of product sales, this will not cover $5,000 in monthly overhead expenses. The cost of selling $5,000 in retail goods could be $3,000 at the wholesale price, so the $5,000 in sales revenue only offers $2,000 in gross profit. The breakeven point is reached when revenue equals all business costs.
  • To calculate your breakeven point, you will need to identify your fixed and variable costs by estimating costs of doing business for the first months Fixed costs are expenses that do not vary with sales volume, including rent and administrative salaries. These expenses must be paid regardless of sales, and are often referred to as overhead costs. Variable costs vary directly with sales volume, such as purchasing inventory, shipping, and manufacturing a product. To establish your breakeven point, use the equation:

                    Fixed costs - variable costs = Breakeven point

Avi Werde

Head Quarters , 231 Rogers Ave, Brooklyn, NY, 11225, United States

Avi started his business life at a very young age, which has allowed him to explore many industries. After finishing his studies as a music student he went on to other areas in the hospitality industry expanding his knowledge and experience to the point that he felt unsatisfied by the restraints and slow progressions of working for another leading him to create his company ECS (Event Connection Source). This brought Avi national and international attention as the world was to experience their first large scale Jewish wedding expo, opening doors that he has been yearning to open. He has since been involved with projects such as Concerts, Galas, Art Shows, Art installations, Fashion shows, managing event spaces, birthdays, product launches, corporate events, Festival management, parties, event marketing, PR, the works.