Starting Up A New Business - How You Can Quickly and Easily Do a Break Even Analysis

Break-even analysis is a good tool for quickly determining if an idea has any legs under it. It is not meant to be used alone as a sole decision making tool. Most business formula-tools work better when tracked over time and compared with other decision making tools, including the owner's gut instinct.

Break-even needs you to track your direct costs. Direct costs are expenses that only occur when you sell a product. Examples of direct costs are cost of products you sell and supplies. Once you subtract these costs from your income, you know how much each sale contributes to pay for your overhead (another term for indirect/fixed costs) costs. Business terminology can get confusing but hang in there.

This can also be done with percentages.

Step 1 is to subtract your direct costs from your income to get a number called Gross Profit.

Step 2 is to divide the gross profit number by your income to determine its percentage of income; e.g.

$2,000 of income minus $500 of direct costs equals $1,500 of gross profit.

$1,500 divided by $2,000 equals 75%. This means that 25 cents of every $1 of sales goes to paying direct costs (products and supplies) and that 75 cents is left over to pay for all the other expenses (indirect costs) plus your profit.

If your company has rent, advertising, utilities, and auto expenses (all indirect costs) of $1,000.

Then $1,000 divided by .75 equals $1,333 (this is the sales volume necessary to pay all your indirect costs and your profit equals zero.

The $1,333 level of sales in this case represents your break-even point.

How can you use break-even info? Using the above example, say you want to hire a helper that is going to cost you $800 per month. How much more income do you need to pay for this helper?

$800 divided by .75 equals $1,067.

You need $1,067 additional income per month to pay the $800.

Break-even analysis is a great way to set sales goals for your sales staff. The base salary you pay would be an indirect cost and any commission would be a direct cost.

Lets use the above example.

$800 for base and you are going to offer a 20% commission on all sales.

The 20% would have to be added to the direct costs (25% + 20% commission = 45%).

The new gross profit as a percent would be 100% (total sales) - 45% = 55% gross profit.

$800 base salary divided by .55 = $1,455 in additional sales to pay for their base salary and commission.

Lets say you want $5,000 per month for yourself. Add the $5000 to the indirect costs and then divide by the Gross Profit % and you now have a pretty good idea of what your sales volume needs to be to provide you with $5,000 a month income.

Let's build on the salesperson example.

$5,000 plus the indirect costs of $1,800 equals $6,800.

$6,800 divided by the gross profit % of 55% or .55 = $12,364 in monthly sales volume should provide you with $5,000 in monthly income.

Break-even analysis is a linear tool and assumes that operational relationships between sales and expenses will remain the same (as laid out in the formula). Decisions involving longer terms or with multiple variables are more difficult to predict and should be re-analyzed over time.

Bruce Hunter is the CEO of CORE Magazine CORE is the leading online source for starting up a new business Visit our free online resource center now to get free access to information on loans for small businesses

Sundial Resturant
Uline Wine Refrigerator
80 Diamond White Gold Ring
Miami To London Flights
Two Tone Loafers
34f Sports Bra Us
Sandies Rainwear
San Antonio Real Estate Texas
Greenhouse Winter
Blossoming Green Tea
Non Stress Test For Pregnancy
Whitewater Rafting Salmon River
Fountain Wall Glass
Cruise Vacation Deal
Dart Board Set Up

Increase Your Scrapbook & Card Making Income

One of the best things about eBay is the way there is a market for creative people who don't need to leave home at all to sell their work.

I like doing things with handmade mulberry paper. My latest creative effort has been applying a layer of handmade mulberry paper on a plain card. I put an aperture in the mulberry paper and then add a lacy edge.

I sell them in lots of 8 and they usually sell quickly on eBay. I could never have found these buyers 10 years ago. We both benefit.

If you have something you love creating eBay is a great place to see what the market is like.

Unless you can afford to papercraft for a hobby an important consideration will always be how long each piece takes to create.

It can be a real challenge to find items you can create that are profitable to sell. If you want to make a living online try creating a range of items.

You will want to research the market by having a good look at what is selling at the moment and what the range of prices are for the products you like. Have a really good study of the sections where people are selling their own handmade pieces.

If you like cards.newspicy.info/compare-credit-card-rates">card toppers have a good look at what is being sold and the prices. You will want to create a product that is not too complicated. Simple but stylish are probably what you want to aim for.

If you don't have the materials you need for what you have decided to design think about using the materials you have already. I am sure you will have no problem coming up with ideas. Remember-time is important. It needs to be cost effective and not take up a large amount of time.

The cost of the materials is usually very small if you use up bits and pieces that you already have. People have amazed themselves by trying this. It will bring out the artist in you.

You can always keep the pieces you make for your scrapbook and card making or you can set up a business selling them.

You are not confined to eBay remember. There are lots of other places you can sell your items. You could have a website where you sell them and you can supply shops if you were able to make large quantities.

Finding your own niche within papercrafting is something you will do over time. Just enjoy what you do.

If there is an opportunity to take classes in new papercrafting techniques that is a great way to spend time. There is always something new to learn. You will never know it all.

If there are no classes in your area and you have the experience why not see if there are enough people in your area to start your own class?

You will meet lots of people with the same interests and can share ideas. You can also help other people learn papercrafting who know nothing about it.

You could have a different focus for each meeting. Some would be scrapbooking evenings and others new papercraft technique evenings.

The important thing is to enjoy what you are doing. To make money from papercrafting- either scrapbooking or card making- look out for what people want but can not find.

This might be unique card toppers. These can be used in scrapbooking as well. For inspiration look at the papercraft magazines and get some ideas but give thought to how you could do something that is different.

There has never been a better time to benefit from creative papercraft. There are lots of options for selling products and services that did not exist until recently. That will only get better.

You can create your masterpiece today and sell it to someone on the other side of the world tomorrow. But if you prefer to stay local there are plenty of ways to do that also.

Remember, if it was easy then everyone would do it but it isn't that hard either. The possibilities are huge and they get larger every day.

Karen O'Donnell enjoys papercrafting and has done it for a living for 4 years. To find out more than 25 different ways of starting a business with papercrafting : http://www.scrapbookandcardmakingforpleasureandprofit.com

Recovery And Divorce
Ds23 Pocket Dresser
Used Motor Oil Btu Content
Kitchen Sink Enamel On Steel
White Chocolate Truffles
How Far From The Dart Board Should You Stand
Akron Steaks
Electrician Careers
Professional Chemical Peels Good Bad
Gas Cards At A Discount
Whole Life Insurance Bank Of America
Rems Real Estate Signs
Saffron History
Home Remodeling Grandy Nc
Bluecross Blueshield Florida Healthy Kids