efore launching a new business venture, it is important to calculate your break-even point (BEP) – this is when your revenue is equal to all your costs and is a key measurement for determining your start-up’s profitability.
“Break-even is important as it tells you how much you have to sell to cover all your outgoings, such as rent, salaries, etc. If you sell more than the break-even amount you are making a profit and if you sell less you are making a loss, which can’t be sustained long term,” explains Ian McLeish, Director of Rosslyn Associates, experts in accountancy and business planning.
By calculating your break-even point, you can then adjust your outgoings and sales targets to achieve break-even more quickly.
“In your business plan, you would normally include break even as the minimum to be achieved over a set period. Of course, you also want to include in your plan a calculation of the additional sales needed to achieve the profit you want.”