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Know Your Shop’s Break-Even Point

Shop Management

Jim Murphy

by Jim Murphy , Partner

By Jim Murphy

Every business owner needs to know their monthly break-even to help them project the business profitability each month. Break-even is very easy to calculate and will take seconds if you have an accurate profit and loss statement. First, acquire your operating expenses for each month of this year. For example, if your October YTD expenses are $768,923, divide that by 10 months and your average per month is $76,892. Then look at your total gross profit percentage. For this example we will use 59.2%. If we divide 59.2% into the $76,892, you will see that you need to generate $129,885 in gross sales to break even. If you want to achieve $10,000 in net profit each month then add that to the expenses, and if you perform the same math you will see that you need $146,777 ($86,892/59.2%) in gross sales to achieve that net profit target. Knowing where you are going in your business will help you achieve your goals and success.

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