Business Basics — What is the Break-Even Point?


How to Increase Profits

If you are thinking about starting your own business, or considering ways to increase your profits, the best way to increase profits is to start at the beginning.  For small business owners, that means calculating your regular overhead to find your break-even point.

Most businesses have fixed expenses due every month, such as rent, insurance, and equipment payments.  Other expenses may be variable, but a monthly average can often be used in place of a fixed amount.  Variable expenses may include the cost of goods sold, credit card processing fees, and utilities.

To find your break-even point, add up the monthly fixed expenses and average monthly variable expenses.  Divide that sum by the number of days your business is open per month.  The result is your daily break-even point.  Your business should bring in at least that amount of revenue every day on average to be profitable.

Business owners in the start-up stage should set aside funds or establish a line of credit to meet the average overhead expenses and keep the business afloat from month to month if necessary for at least a year after start-up. 

Business owners looking for ways to increase profits should review the fixed and variable expenses to look for ways to save overhead.  Of course, an alternative or accompanying goal is to reach more customers and increase revenue without increasing expenses.

For more information about starting a business, or for help with other matters related to managing your business, the attorneys at the Scolieri Law Group, P.C. can help.  Located in western Pennsylvania, our attorneys are experienced in Pennsylvania business law and can take care of the details for you every step of the way.  Contact us today at (412) 765-0546 or via email at info@scolierilaw.com.