Every business needs to have a certain amount of sales to cover their fixed costs and that becomes a challenge for businesses that are running at or below break-even.
Right now, for many businesses, it’s critical to get to break-even quickly. So understanding your breakeven point and being able to evaluate your fixed costs to bring that break-even point down is a priority.
In this video, we look at using a simple two-step mathematical formula to calculate your break-even point – where your gross profit will cover your fixed costs.
Knowing your break-even point tells you how much you must sell to cover your fixed costs. Once you have the number, look at ways to lower fixed costs or lift gross profit, and check it again every few months. For more on margins, have a read of what is profit margin. There is also a general page on gross margin on Wikipedia.
