Business By the Numbers - Part 5 - Break Even Analysis

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    By Jim D'Amico

    Jim_NoTie

    Business By the Numbers - Part 4” discussed the importance of tracking your business by using numbers from your Balance Sheet and Profit and Loss statement to determine your Sustainable Growth Rate without increasing your debt-to-equity ratio.

    Business Break Even Analysis

    “Break even is the amount of sales that produces just enough revenue to cover your expenses and overhead without a loss or profit.  It is important to know the break even for the business because it will tell you in every period whether you are going to make a profit AND it tells you whether you need to reduce your overhead and by how much.

    A very simple, close to accurate, way to approximate break even is to find the amount of sales at the current Gross Profit Margin that equals the current dollar amount of operating expenses.

    Business Break Even Analysis Formula

    Break Even = Fixed Expenses + Interest / Gross Margin”

    Business By the Numbers Part 6 will feature Z-Score.

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    *About Vistage (from Vistage.com): Since 1957, Vistage has been bringing together successful CEOs, executives and business owners into private peer advisory groups guided by expert executive coaches, known as Vistage Chairs. This assembly of peers & expert leaders makes up Vistage Worldwide, an executive coaching organization.
    From the beginning, our coaching Chairs have been at the heart of what makes the Vistage experience so powerful for so many members. Vistage Chairs are a distinguished group of business leaders who come to us from a wide range of industries. Some have owned businesses, many have been CEOs of domestic and international companies, and all are united by a desire to share their insight and expertise to educate other business leaders in their communities through executive business coaching.
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