One of the most effective ways to drive your business toward profitability is by focusing on the break-even point. The break-even point is the point at which expenses and revenue are equal. Performing this calculation is a critical step for determining what sales volume is necessary to cover costs of operating the business.
An efficient and effective way for monitoring break-even is by using a visualization tool such as Tableau. In this Breakeven Analysis dashboard, the units and sales dollar goals for the company are shown as blue bars. The actual performance for the month is shown with the gray bar. This particular company’s goal was to exceed 2x breakeven. The full circle identifies months where this goal was achieved.
You can benefit from using a similar dashboard if you are:
- A startup exploring the feasibility of your business. Does your new business venture require unrealistic levels of sales to achieve break even? Do operating costs need to be reduced to make the business model viable?
- Setting prices for services or products. The break-even analysis will allow you to ensure that your price is realistic in relation to your costs and the expected volume of sales for your product.
- Creating forecasts. Break-even calculations are an essential element to financial forecasting. They articulate the risk that any variance in cost or price change could have on profitability.
Ready to get started with analyzing your business’s break-even point? If so, email Keri James at keri@kerijamescpa.com or submit a request via the contact form. I look forward to discussing your business’s goals with you!
