The Rule of Holes: Know When To Stop Digging
Knowing your break-even point -- the point at which total cost and total revenue are equal is important to running a business. It is not just good enough to reach your daily break even, you must exceed it if you are to stay in business.
Knowing the break-even point is helpful in deciding gross margin on parts, labor rates, setting sales budgets and preparing a business plan. If you do not reach your daily break-even then there is a great chance that you had a loss of profit for the day.
This episode provides a worksheet download for calculating break-even. The numbers will come from your financial statements. Your accountant can also provide them. The key to knowing your break-even set the tone when you are reaching for your profitable sales goal. You’ll know what the minimum excepted number is without digging yourself into a hole.
