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What is a breakeven analysis and why should one be included in a business plan?

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2011-06-03 00:24:52
2011-06-03 00:24:52
Breakeven Analysis

Break even is the the difference between revenue what is made through services or what it costs to manufacture a product. This is the prime costs, direct costs the difference of both revenue and total prime costs is called contribution. This contribution needs to cover fixed costs as well as total overheads indirect costs. Using breakeven is a good way of controling your costs and working out if your selling price is too high or low compared to your competitors, then it is a matter of using the competitor pricing method or the actual cost method to work out your mark up.

Break even will tell you and most importantly your business advisors, the number of clients you need on a weekly, monthly basis. This will prompt you on how much projected profit cash flow you can forecast for the business to make in the first year of trading.

Hope this helps. Please let me know if you need more informtion

Andrew swift

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