The #1 reason businesses fail is that they run out of cash. Not knowing your break-even point is a great way to run out of cash. This deck goes into what exactly is a break-even point and how to calculate, along with many other nuggets.

1. Breaking down
the break-even

2. 2 2
BREAKDOWN:
BUSINESSES (& SOME
RELATIONSHIPS) FAIL BECAUSE
THEY RAN OUT OF CASH

3. How to
run out of
cash
Variable Cost are more than sales
revenue
Profit margin is less than
overhead or fixed costs
Buying too much inventory
3 simple ways
3

4. How NOT
to run out
of cash
Know your “break-even” point
Manage your inventory
Prepare & Maintain a Budget
3 simple ways
4

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What is this
thing called
“BREAKEVEN”?
BEP or BEQ is the sales amount
that is required to cover total
costs, both fixed & variable
The point at which Sales = Costs
BEP: Break Even Point
BEQ: Break Even Quantity

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fixed
costs
Rent / Lease Electricity
Insurance Office Supplies
Accounting Salary
variable
costs
Machine Repairs Product Supplies
Materials Labor
Other Job Costs
semi-fixed
costs
Travel Purchases (PPE)
Supplies Salary
Phones Insurance

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Calculation
Sales – Cost of sales (variable) – Expenses
(Fixed) = Net Income
Sales – Cost of sales – Expenses = $0
Sales – Cost of sales = Expenses
Sales of $2,000 – Cost of Sales of $1,200 =
Expenses of $800

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90 days of
transactions
Sort & bucket
expenses
Use the
equation
If you have no idea
How to
get there

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Break even point
0
25
50
75
100
125
150
175

10. When to
use?
• Starting a new Business
• Creating a new product
• Adding a new sales channel
• Advertising & Marketing
• Changing the business model
• Pricing
• Expansion
• Retraction

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Where is this
valid?
Return on Investment Analysis
If I’m going to spend $10 million on a
marketing campaign, how many additional
units of my product do I need to sell to
breakeven on the investment?
SOME THINGS WILL NEVER CHANGE NO
MATTER HOW YOU PLAY THIS OUT
Sales Volume Analysis
Pricing changes are complicated because
when you change price, you inherently
effect demand

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Cutback
your time
frame
This can be annual, quarterly,
monthly, weekly, or even daily
IMAGINE IF YOU KNEW HOW
MUCH YOU HAD TO MAKE
ON ANY GIVEN DAY TO
BREAK EVEN

13. Can Break Even
be lowered
• Lower fixed costs
• Raise your prices
• Lower variable costs

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So how
important is
break even
analysis?
You need to understand what
you are trying to achieve,
what it will cost you, and then
how likely it is to succeed.

15. You Can’t Simply Mak
e it Up on Volume

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two
ways
to act
do nothing and forget
It is easy to walk away and
forget everything about
break-even analysis. Can’t
blame you for
act on it and survive
You can also explore your
recent historical results to
determine your break even
point & actively manage
your life or business

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don’t hesitate to contact me
contact
address:
202 Government St
Mobile AL 36602
contact:
brent@brentmcclure.com
www.brentmcclure.com
phone:
205 613 9708