BREAK EVEN ANALYSIS
by NHKC Capital Resources™
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Break Even Analysis
Use this topic to explain the break-even table and chart. Explain your underlying assumptions. Unless you change the linking, this topic will be followed first by the table and next by the topic. The classic break-even is a measure of risk, comparing fixed costs to variable costs. It normally takes a company or a business unit and estimated fixed costs, per-unit (or per dollar of sales) variable costs, and per-unit revenue. The lower the fixed costs in relation to total sales, the less the risk. The lower the break-even point, the less the risk. You can do this kind of break-even analysis in a marketing plan, and it can be very valuable. You can also just delete this topic and skip the break-even, if that's your choice. You could also do a more marketing-oriented break-even analysis, by estimating either your long-term investment or long-term fixed costs as the fixed cost component, then following through with per-unit revenue and per-unit variable cost on the specific portion of your business, product, or service. For example, if you invest $10,000 to buy a product license, sell the product for $1.00 and buy it for $0.50, how many do you have to sell to break even on the overall marketing project?The traditional break-even is more useful for start-up companies than ongoing or already existing companies, because it assumes a snapshot of the business position at one imaginary point in time, and also because it deals with fixed costs in a way that may not be all that useful. The break-even is more valuable for start-ups and initial assessments because it offers real insight into what might become the realities of a potential business. It is also hard to deal with because it requires making estimates of unit prices and unit variable costs for the entire business, rather than for each product or product line. It is frequently hard to come up with a single estimate. However, even while it might not be that useful, we do a break-even analysis because people who read marketing plans expect one. Despite its limitations, this is a standard analysis that financial readers and planning experts will expect to see. Explain the break-even assumptions:
You might also cover the implications of the break-even.
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