How Long Since You Looked at Your Breakeven?

I taught a course yesterday on Financial Decision-Making at Saint Mary’s University. One of the topics was breakeven, defined as the level of sales where an organization neither makes money, nor does it lose money.

Accountants are fond of breakeven as it is a dividing line between something that works and something that does not work. Many of us calculate breakeven in our heads when we make decisions about buying a season pass or paying for three of something rather than one to get the lower price. Established businesses do not often have a plan to revisit the breakeven. If your business sells a number of products or services you will be making a different amount of money on each.

How long since you looked at all your products and services and figured out whether you are making money on each of them? Maybe some of your costs have changed since the last time you did these calculations, and you might want to revisit your pricing to keep the same profit margin. It could be a good idea to make a plan to look at your breakeven on a regular basis.

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