Chapter 2 – Financial Control – Rule your money
This is part of the ‘How to’ coaching series. An ongoing series of activities to make your business successful. Follow it step by step and see positive results as you develop a robust business model, set on a solid foundation.
Activity 13 – I know how many sales, customers, or £££ I need to make per day/week/month to a Break Even.
At what point will your company hit Break Even?
Some significant businesses do not hit a break even for many years. Looking at a more usual SMe, once the company is more established, around year 3 or 4, the break even point will at a point during the financial year. A statistic of a few years ago was that average businesses usually hit Break Even at around month 7 to 8 of their financial year.
Typically, employees will be making the business a profit after around hour 5 of an 8 hour day. So, when your staff go home early, you’re loosing their profitable time. It’s not quite as simple as that, but certainly thought provoking.
For example, if you view Break Even on an annual basis, It’s when all your annual costs are covered and you are making profit. What is Profit?, that’s a totally differentquestion we will look at in another blog.
When you know a statistic like your Break Even, you will understand what your targets need to be. You can then see what resources are required and the effort needed to hit target.
The Break Even statistic is useful to compare the trend of how the business is performing on a like for like time period.
The ‘How to’ bit:
Work out your income units (by Sales, Customer or £££) for a given time period (day/week/month/year) depending on how you maintain your records. Work out the costs of running the business, including any associated sales related costs, for the month.
This will show at what point the income exceeded the outgoings. Or how close you came to Break Even.
Collect this data so you can use the average to predict the Break Even for future months, years based on planned growth/increased costs.
If you would like help understanding how to determine how to set up your Break Even system, follow this link and Contact Us…