Business Plan Help

Break Even Analysis Help

Explanation of Terms: Break Even Analysis

A “Break Even Analysis” explains how much you need to sell each month to pay all of the monthly operating expenses. Up to this point a business is not making a profit even though it is selling product for more than it is buying it for (Gross Profit), all the profit produced to that point is going towards paying expenses. Revenues produced over the break even point are the “real” profit (Net Profit).

Average Gross Profit Margin: This figure is determined by taking the selling price of a product or service and subtracting the Cost of Goods Sold to arrive at the Gross Profit, then computing it to a percentage. This table “averages” them by using your figures you can get from the Sales and COGS projections and enter into the respective columns. You can use the annual figure and divide by twelve (12) to get an average monthly figure for both.

Average Monthly Operating Expenses: You can use the monthly figure from the “operating expenses” section of the financial plan.