When we start a business or a venture we know that the first months are for investment after investment until we reach a leveling point that serves as a basis to begin to see the profits. This leveling we mentioned is also known as Break-even Point and refers to when the total income of your business is equal to the total expenses, which allows us to be in a kind of a zen point.
The financial Break-even Point translates into reaching a state in which we know that we will not incur losses. As we mentioned, every time we start a business there is something very clear: the investment will be greater than the profit. In fact, before profiting, we reach the Break-even Point that welcomes us to the profit stage of the business. .
The Break-even Point comes to your business as a dead point in which no losses or profits are generated. Although it does not sound encouraging, it is a very important point of equilibrium in your company because it is the closing of the investment-only period and the beginning of the expected benefits since you started your business.
The goal of any business is not only to reach this point of financial equilibrium and stay there like a life preserver in a shipwreck. The Break-even Point in your company should only last as long as it takes for you to start enjoying the profits from all the effort of the previous months.
That is why knowing the number of units sold from which you generate profits is the best way to reach the Break-even Point in your business. This way you will be able to analyze the impact of the decisions you make according to your results, and it will even let you know if your company is viable or if it is impossible to sell the desired number of units to cover the total expenses and generate profits.
To calculate the Break-even Point in your company is simple, as long as you have the necessary information at hand, such as the fixed costs and variable costs of your business. However, if this information is not clear to you, from Total Tax we can help you to achieve that break-even point in your company by updating your accounting so that you know all the costs that your business represents.
At Total Tax, we can advise you on financial matters to achieve the desired Break-even Point in your business and analyze the latest movements of your company to improve it and make your business grow even more.