How Do You Calculate A Break Even Point From A Balance Sheet?
The basics of business are: 1) Customers want a product; 2) You sell your product to customers; 3) You profit. It may seem simple, but there is much more that goes into running a business successfully than those three components. In order for business owners to have a clear idea of exactly when and how they will “break even” and start making a profit, it is imperative that they know how to calculate a break-even point from a balance sheet. This article will outline the basics of using a monthly balance sheet to determine the break-even point for the business. Begin by determining the fixed amount it takes to keep your business open (i.e., utilities, expenses, rent, etc.) each month. Add up all of your monthly expenses (not including the supply or production costs of your products). Determine the profitability of each of your products. Profitability is equal to the retail price of the item minus the cost of production. Plug your figures into this formula: $Cost of running business / ($T
