Download this Break-Even Template.
Get a general idea of how much you’d like your business to earn each year— and ensure you have a viable product or service. This break-even template is a simple tool you can use to work out how much you need to sell in order to achieve your desired financial return.
You enter:
- Your desired financial return for the year
- Annual overheads
- Per-unit pricing
- Per-unit labour and material costs
- The number of weeks you intend to work each year
It calculates:
- Total cost per unit
- Total gross margin per unit
- Number of units you need to sell to reach your target
- Total amount of sales you need to reach your target
- The units you need to sell weekly to reach your goal
Why use the break-even template?
The break-even template helps you define your financial goal for the year and experiment with various factors to see how they affect the outcome. For example, you may realize that your margin is too thin or that you’ll need to ramp up sales dramatically to reach your goal.
After inputting your numbers, use the template to see how certain changes can affect your bottom line.
Experiment with different scenarios
Testing different scenarios to see what happens—such as changing your per-unit price or lowering wages or overheads – can help you decide if adjustments are needed. Even if overheads, wages, materials costs and prices remain stable throughout the year, having a weekly target number of sales per week can keep you on track.
Examples of factors you can change
Overheads
Would it make sense to move to cheaper office space? Can you work out of your home or garage for the first year? What happens if your rent goes up? The break-even template will show you how many more units you’ll need to sell each year to make up the difference.
Labour costs
Can you automate any portion of production? For example, buying or leasing a laser cutter or label applicator could reduce your labour costs. Such a move will increase your overheads, so use the breakeven template to see which option is best for your business.
Materials costs
Is it possible to negotiate discounts with your suppliers? If you don’t quite have the volume required to qualify for volume discounts, ask about discounts for early payments. Consider shopping around or using alternative materials to reduce your costs, and then use the break-even template to see if it’s worth switching. If your costs go up, you’ll need to either raise your prices, reduce your overheads or make up the difference through volume sales.
