Profit Soup Podcast

Planning for Breakeven Plus

Episode Summary

Breakeven analysis sounds scary, but it isn’t. It is a simple formula (not a goal!). You can use it to select profitable sales goals and determine the sales needed to earn a target return on your marketing, hiring and expansion investments. Set your sales goals to yield your Breakeven PLUS - because profit is not optional!

Episode Notes

• Breakeven means your profit is exactly zero—no profit and no loss
• "Breakeven PLUS" is the sales level needed to hit your targeted profit goals.
• The contribution margin shows how much of each sales dollar goes toward covering fixed costs and generating profit (after variable costs are paid).
• Sales commissions are a classic example of a variable cost—they rise and fall with your sales.
• Regularly monitoring your cost structure helps you respond to changes that could hurt profitability.
• If supplier prices increase and you don’t adjust your prices, your variable cost percentage goes up—cutting into your margin.
• A 5-line P&L (Profit & Loss) report simplifies financial data so you can quickly spot trends and take action.