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Implementing the Break-even Analysis

Implementing the Break-even Analysis to Improve Business Growth.

Implementing the Break-even Analysis to Improve Business Growth

It’s important not to lose sight of revenue and business spending. In my experience, I have found many business owners don’t have extensive knowledge of their revenues and break-even points. To achieve business goals, you must start Implementing the Break-even Analysis tools at your disposal.

I’m amazed by how many business owners aren’t familiar with the numbers surrounding their cash flows, revenue, and profits. These entrepreneurs run companies with revenues of 50 million dollars. Lack of with in-depth knowledge about a company’s numbers and break-even analysis negatively affects business growth.

I find even the most successful entrepreneurs telling themselves: “As long as I have money to pay for things, everything is okay.” This mindset is acceptable in the start-up phase but is toxic further down the road and hinders business growth, potential and even lead to ruin.

Understanding the break-even analysis of your company can help avoid these mistakes.

What is a break-even analysis?

Break-even analysis a calculation and examination that explores how much a company needs to sell in order to cover the all the costs associated with doing business. A break-even analysis calculates the break-even point by examining the link between sales, profits and cash flows. The uses of break-even point in this analysis provide a dynamic view of the relationships between expenses and revenues.

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Why is a break-even analysis useful?

 

Break-even analysis examines the levels of fixed costs in relation to the profit earned by each unit produced and sold. This metric allows management to set prices and understand the economic impact of various pricing scenarios.

Importance of a break-even analysis in business decisions

 

Applying a break-even analysis to business decisions to improve growth. The Harvard Business Review has found a link between setting the right price for a product or service and boost in profits and sales. HBR even provides an interactive break-even analysis that allows users to input actual units sold along with revenue, variable and fixed costs per units sold.

Download your Break-even analysis calculator template! This has been tested with 15 small business owners from different industries and proven to suit their needs. This template is not suitable for businesses that employ over 100 staff members.

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